A preliminary decision by the Commerce Department to drop a 1996 trade agreement with Mexico over Mexican tomato exports is the latest in a string of trade policy decisions handed down by the Obama administration that will benefit key swing states in the 2012 election.
Tomatoes grown in the United States are more expensive than tomatoes from Mexico, a disparity that has led tomato growers and producers to sell Mexican tomatoes in the U.S. below market prices. Some consider such exporting to be a predatory practice known as “dumping.”
A 1996 agreement between the U.S. and Mexico ended an anti-dumping investigation by the Commerce Department into Mexican tomato producers and exporters by setting a price floor for Mexican tomatoes that protected the American tomato industry.
On June 22, a group of primarily Florida-based tomato growers requested that the Commerce Department end the agreement, arguing it was out of date and that the price floor no longer adequately protected the domestic growers, according to a Commerce Department memo.
The Commerce Department announced a “changed circumstances review” on Aug. 21 before announcing a “preliminary intent to terminate” the 1996 agreement just 37 days after the department opened the review.
Ending the agreement would allow the U.S. to relaunch the antidumping investigation and institute protectionist measures, potentially cutting off Mexican tomatoes from the U.S. market and raising fears of a trade war between the two countries.
Claude Barfield, a former consultant to the U.S. Trade Representative and expert at the American Enterprise Institute, called the move a “small-minded political gesture” and “bad trade policy” that could “make Mexican tomatoes more expensive.”
“It is a bad deal for the American consumer,” Barfield said. But it is a great deal for Florida tomato farmers.
Florida, where most of the complainants are located, is “the second largest U.S. tomato producer,” according to Reuters. It is also a key battleground state in the election this November.
A Commerce Department official told the Free Beacon that the department typically issues preliminary decisions that are open to further comment.
“Interested parties are invited to comment on the preliminary results. Prior to making a final decision in this changed circumstances review, Commerce will fully consider any new, timely filed comments, as well as those comments filed after the Sept. 4, 2012, deadline for comments on the initiation,” said a second Commerce spokesperson.
The preliminary decision to end the agreement has struck some as a political move to gain votes.
Ike Brannon, director of congressional relations for the Economic Policy for the American Action Forum, noted that the issue’s “urgency seems pretty manufactured,” concluding, “This is an attempt to gain a few votes in Florida.”
The tomato case is a perfect issue to leverage for some votes, Brannon said. “This is not on anyone’s radar save for the parties to this action … everyone else doesn’t have the foggiest idea of what’s going on.”
Peter Morici, a professor at the University of Maryland Smith School of Business, noted an increase of trade activity during the campaign, and believes the president’s “strategy has been to target benefits to sectors like automobiles” that impact swing states like Ohio.
For example, during a campaign event last month in Ohio, Obama announced a World Trade Organization complaint against Chinese car subsides, which hurt U.S. car automobile manufacturers and their heavily unionized employees. Auto manufacturing comprises about 12.4 percent of Ohio’s jobs.
Last week Obama blocked “a privately owned Chinese company from building wind turbines close to a Navy military site in Oregon due to national security concerns,” reported Reuters.
The move coincides with a TV ad blitz criticizing GOP presidential candidate Mitt Romney for his relationships with Chinese companies.
“The Obama campaign is likely to use the decision to burnish Obama’s credentials as a president who is ‘tough on China,’” wrote the Hill.
The U.S. Trade Representative’s Office would not answer questions about politicization of trade policies, referring the Free Beacon to the White House.
The White House did not return a request for comment.
The tomato fight comes as some criticize the president for being weak on international trade.
“He hasn’t been very good at standing up for American interests,” said Morici, who noted that the U.S. trade deficit costs the U.S. “about three million jobs.”
Barfield said that the President imposed a union-backed tariff on Chinese tires in 2009, but noted the tires made in China are low-end tires that the U.S. does not even manufacture. The result of the decision, Barfield said, was that we got the same tires from other countries such as Taiwan and Indonesia at higher prices.
“Look at the total economics of it; it doesn’t make any sense,” Barfield said.
He added that during Obama’s first year in office, the U.S. did not really have an effective trade policy. Barfield attributed the distraction away from trade to the economic crisis at that time.
An editorial by Amb. Ron Kirk, Obama’s trade representative, confirms Barfield’s analysis characterizing Obama’s first term as relatively inactive.
In an effort to pass the three trade agreements that the president inherited from his predecessor, “We began in 2009, with work that few noticed,” Kirk wrote. This work consisted of “seeking input” from “stakeholders.”
Obama “hasn’t done anything new,” Barfield said. “He completed what he inherited, but he didn’t initiate any new” free trade agreements.
The Trade Representative Office’s website indicates that only two of three free trade agreements have gone into force.
Barfield also said the U.S. is falling behind other countries. While there was a burst of agreements over the past decade, “we’ve just stopped doing that,” he said.
Former Secretary of State Condoleezza Rice made this point in her address to the Republican National Convention:
In the last years, the United States has ratified three trade agreements, all negotiated in the Bush Administration. If you are concerned about China’s rise — consider this fact — China has signed 15 Free Trade Agreements and is negotiating 20 more. Sadly we are abandoning the playing field of free trade — and it will come back to haunt us.
Brannon noted that because of the extensive trade agreements forming in Asia right now, “it would be a great time to have an administration that’s serious about expanding trade.”
Morici said that Obama is out of touch with the economic realities on the ground.
“He’s got a lot of Ivy League advisers who have never seen a factory,” he said.