July 2019 – On the surface, the long-standing debate consuming the tomato industry is played out in a kind of legalese. The Florida contingent claims the Mexicans are doing all kinds of illegal things, including subsidizing the Mexican tomato industry and dumping tomatoes in the United States. The Mexicans contest these claims, denying doing anything that is illegal, that violates treaties or would be a cause for action by the United States.
The whole use of the term “dumping” is problematic in the produce industry. Traditionally, dumping means one of two things — selling an item in a foreign market below its cost of production or selling it for less than its sale price within the country of production.
Yet, by either of these definitions, produce is dumped every day of the year. First, the cost of production is irrelevant to the short-term marketing of a perishable product. It is not possible to store produce in a warehouse indefinitely waiting for the market to rise above its replacement cost.
In the same way, the reference to a home market price rarely makes sense in produce. Think about the Central American or Caribbean countries that export melons to the United States or the grapes exported out of Chile. These products are grown with the intent of exporting them. There is no relevant domestic market.
An additional complicating factor in produce is that most imported produce is not actually sold at a fixed price in the United States but rather consigned. Producers, growing the product for export, find marketing agents and consign the produce to them, hoping to get the best return based on current market conditions.
This is necessary because producers need to ship their perishable products every day. There is very little option for them to negotiate a fixed price with a direct buyer because what would they do with the produce if the buyer said no? Implicit in the global supply chain for fresh produce is the notion that producers are prepared to accept the market price, and they ship with the understanding not that their agents will always get profitable prices, but that they will get the market price — high or low.
There is little question that the market for tomatoes has shifted from mature-green gassed tomatoes to vine-ripe and, in general, tomatoes grown in various degrees of controlled environment agriculture. Due to many intrinsic factors, such as climate, labor, etc., Florida has been disadvantaged by this shift. Consumers should, of course, have the right to buy the products they prefer, and the Florida tomato industry is losing out because it has not been able to advance to meet consumer demand.
Yet — and this is a great dilemma of the Trump era — this free market approach doesn’t seem to capture the aspirations of many Americans. There is a notion that all across the great heartland of America, factories have closed, and the communities they sustained were harmed. Even if, in some kind of economic determinism, using comparative advantage analysis, we could prove that the loss of those jobs was more than exceeded by the gains in employment of investment bankers in Manhattan and San Francisco, it is not clear that this would be the America that Americans would vote for.
When the British voted for Brexit, they did so despite being told many times that the result would be a smaller gross domestic product. But man does not live by his bank account alone, and the majority, who embraced Brexit, thought their lives and those of their children and their children’s children would be enhanced in intangible ways — in non-financial ways — by preserving a distinctive English life, rather than merging into a European identity.
So, this is really the churning dynamic of capitalism vs. culture. The capitalist tells us, irrefutably, that economic prosperity is obtained and preserved by free trade. Yet, the cultural advocate tells us that communities all across the land — manufacturing plants in the Midwest and, yes, ag towns everywhere — support churches and American Legion halls, Boy Scout troops and marching bands and raise up the kind of people who answer their country’s call when our wars have to be fought.
The argument about the technicalities of tomato trade really miss the point. It is two ships passing in the night. The question of whether we will have steel mills in Pennsylvania or tomato fields in Florida is a debate over what kind of country we want to be.
It is not a new battle in America. Jefferson praised the yeoman farmer as a source of virtue for the new Republic, calling farmers “God’s Chosen People” in his Notes on the State of Virginia, while Alexander Hamilton, praised the Industrial Republic in his famous Report on Manufacturers.
Jefferson won our hearts, but Hamilton wrote our future as a nation. But we are much richer today, and the necessity of accepting social change to maximize income may be less than it once was.
Whatever the outcome, the mistake is to think we are just talking about tomatoes. pb