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Pundit's Mailbag — Florida Versus Mexican Tomatoes: Protectionism Isn’t The Answer

Jim Prevor’s Perishable Pundit, October 15, 2012

We have run several pieces regarding the dispute between the Florida tomato growers and the Mexican producers:

After 16 Years Of Compliance, Florida-Mexican Tomato ‘Suspension’ Agreement Gets Challenged By Florida Growers Claiming Dumping Is Occurring: Is This Just Rent-Seeking?

The Florida Tomato Growers Are In The Right Legally, But More Than Tomato Production May Be At Stake In This Battle

In general, we satisfied nobody. The Mexicans didn’t like that we favored lifting the suspension agreement, and the Floridians weren’t crazy that we questioned the logic of anti-dumping laws as they related to perishables. A US greenhouse grower sent this note along:

You failed to mention protecting farmers in the US from those outside the US that would benefit from having these farmers not in business, and then grabbing larger share at the expense of the US ag business.

Free trade also means fair trade… look at sugar, tobacco, wheat, all the policies we use to protect our ag interests for national security and the sake of the economy.

A strong US-based ag business helps the economy by creating jobs and strengthening our ability to not be reliant on outside interests. Free and fair trade is a great concept as long as we apply these metrics equally.

When you look at the recent pricing, although temporarily good for consumers, if there are less farms in the market, eventually the pricing will rise due to lack of supply and in the long run consumers will not benefit.

We bow to no one in our support for US farmers. We count more than a few as very close friends.

Yet we have to confess that we are quite uncertain what advocating “fair trade” actually means. Certainly, we could understand that if one government was subsidizing its industry that the US might not want to stand by idly and lose that capacity. Our point, though, was that the anti-dumping laws do not require anyone to show that foreign producers are being subsidized.

Once one gets beyond the issue of government subsidies, then the question becomes what type of conditions would make trade “unfair”? Different areas have different advantages in producing different things. Some have ample labor, cheap water, low taxes, few regulatory requirements; others have intellectual capital or geographic proximity or critical mass. This is why we have trade so we can all get richer by buying products more economically.

Much of our attention should be paid to alleviating these issues. Have we done all we can to make sure water is available, labor, etc., in this country? If, however, we choose to not allow immigrant labor in, that doesn’t make it unfair for some other country to have lower wages.

There is no question that domestic-production agriculture generates jobs, etc., and to the extent our industries are competitive and thus get business as a result of voluntary transactions, this is undeniably good for the country. But if we have to block competitors to raise prices, then there is a cost —the cost being all the money consumers spend on a protected product that they would have spent elsewhere. This means that for the win on the protected industry, there is a loss in jobs elsewhere in the economy.

Protectionism does make the country more independent, but it is not clear that independence on tomatoes is an important matter. There is no question that we have taken steps to protect domestic producers of sugar and other industries, but it is not clear that these steps are wise or help our economy or our country.

It also is a bottom-line fact that countries don’t simply let us do whatever we feel like. It is highly predictable that a tariff on tomatoes into the US will wind up being countered by a tariff on, say, apples going into Mexico. It is not clear this will be a win for US production agriculture.

In the long run, industries that get protected tend to atrophy. Take a look at the total market irrelevance of the highly protected French cinema. Andrew Grove of Intel once wrote a book titled Only the Paranoid Survive. He might have pointed out the problem with protectionism is it makes an industry less paranoid. Why stay on the cutting edge of consumer preference, why invest in the latest and greatest technologies, why strive down the difficult road of being world-class if you are being protected from competition? Most don’t do this because it is fun; they do it because the whole world is racing to make them obsolete and they want desperately to survive.

We want to help farmers in Florida. We want them to have incredible varieties, access to labor, competitive taxes and regulatory burdens. We want them to win because they are progressive growers and brilliant marketers. We want them to win because they run a great race. Anything that makes it easier to postpone bringing this to fruition is not likely to help in the long run.

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