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Market Uncertainty

For more than a decade agricultural producers have shipped fresh, processed, juiced and frozen fruits and vegetables to Mexico free from tariffs. That was one of the results of the North American Free Trade Agreement, which included the agricultural provisions from the previous Canadian Free Trade Agreement in effect since 1989. Since NAFTA took effect, agricultural shipments to Mexico have grown to $11.5 billion in 2007 – and a value of $20 million to the potato industry.

But in March, the Mexican government introduced a tariff on frozen potato products from the United States, one of 55 products singled out for import taxes. The tariff was the result of the U.S. government’s inability to uphold one of the agreed-upon measures of NAFTA – to allow Mexican long-haul trucks into the United States.

The Mexican government was justified in issuing the tariff because the United States did not uphold its end of the bargain. Despite political opposition to the Mexican trucking measure, the administration is bound to follow through on agreements, even if they’re signed by other administrations or from differing ideological positions.

Unfortunately, the tariffs put U.S. growers and processors in a bad spot. Since the Canadian potato industry isn’t taxed shipping to Mexico, products from the north flowing through the United States are cheaper than those produced here. If the tariffs continue, processors could lose nearly all of their market in Mexico. The same is true for other industries, with tariffs ranging from 10 percent for onions and lettuce to 45 percent for fresh grapes.

The potato industry associations, and other commodity groups, are making the industries’ positions heard in Congress and the various government agencies. Their message to anyone who will listen is: Don’t respond with tariffs on Mexican goods, as one Congressman has suggested, but uphold the United States’ end of the NAFTA agreement. That is a surefire way to have the tariffs removed.

In a time of global economic uncertainty, job loss and wealth reduction in the United States, it should be political suicide for Congress or an administration not to do everything in their power to remove international trade barriers.

I’m certain most of your potato businesses operate on mutual trust between your suppliers and buyers, and it is vital that the United States government upholds the same level of trust by sticking to its promises.

Originally posted Monday, May. 11, 2009

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