Mexican tariff creates market uncertainties for pears, cherries, and soft fruits.
Pear industry officials are hopeful the Mexican tariff imposed on pears and nearly 90 other products in mid-March will be resolved quickly, perhaps as early as May.
Jeff Correa, international export director for the Pear Bureau Northwest, said he's optimistic the issue will be resolved during a trip to Mexico scheduled for mid-April by President Obama. "It may be that a proposal to resolve the trucking issue must be voted on by Congress upon Obama's return," he said, adding that indications are that the tariff will not be long term.
Mexico instituted a range of tariffs—from 10 to 45 percent—on agricultural and nonagricultural products imported from the United States in retaliation to the elimination of a cross-border trucking pilot program between Mexico and the United States.
Under terms of the North American Free Trade Agreement that was enacted in 1994, Mexican carriers were to be allowed to deliver cargo anywhere in the United States by 2000, according to information on the Northwest Horticultural Council's Web site. When the United States failed to allow such access, Mexico won a trade dispute against the U.S. that gave them the right to retaliate by as much as $2 billion of U.S. products per year unless the United States complied with its NAFTA obligations. The cross-border trucking pilot program began in September 2007.
In addition to pears that were slapped with the 20 percent tariff, cherries, apricots, and wine have also been hit with a 20 percent tariff. Table grapes face an even stiffer tariff of 45 percent.
Correa said that the initial reaction to the pear tariff was a complete hold on shipments. By the end of March, however, a review of export shipments gathered by industry analysts showed that exports to Mexico were not that far off of past-year shipments, Correa said, but the data may not reflect cancelled or postponed shipments. Industry data from Washington State shippers showed that through the end of March, 1.5 million boxes of Washington pears had been exported to Mexico, representing about 35 percent of all exported pears.
He believes that Northwest pears will likely continue to be shipped but in less volume or value because of the tariff. "It may be that there are more orders for U.S. No. 1s instead of the U.S. Fancy grade, because the tariff on U.S. No 1 would be less."
Fortunately for Northwest pear shippers, the tariff was imposed just as Argentine pears were shut out of the Mexican market due to quarantine issues. "Argentina usually enters with their pears at this time of the year," Correa notes. "But with Argentina's system approach program halted, there are no immediate suppliers of pears to fill the gap."
He said the timing of the Argentina issue and the U.S. tariff issue happened within days of each other.
Mexico is the number-one export market for U.S. pears, typically taking about 40 percent of all pear exports. Northwest pear sales to Mexico range from $50 million to $60 million annually. Bosc pears are usually exported until May. The shipping season for d'Anjou pears to Mexico usually goes until July.
Initially, the Pear Bureau projected that the tariff would impact exports by 20 to 30 percent. Correa is now hopeful that if the tariff is lifted in May, shippers can recoup most of the market, reducing the impact to only about 10 percent.
He warned, however, that when the tariff comes off, the market will likely be disrupted once again as it will create disparity in prices between fruit sold under the tariff and fruit sold without. "You can expect to see holding of trucks on the border waiting for the tariff to be lifted and a temporary logjam in the market."
The market in Mexico for Northwest cherries, though small compared to other major cherry export markets, has been growing in recent years. In 2008, nearly 74,000 boxes were exported, totaling close to $2 million in sales, reports the Northwest Cherry Growers. Northwest cherry shipments to Mexico last year increased 11 percent from 2007 shipments, a surprising increase considering that most countries imported significantly fewer cherries because of the short crop.
For apricots, Mexico is a key export market for California. In 2008, California producers sent 166,000 cartons of apricots to Mexico, according to the California Grape and Tree Fruit League. In past years, Mexico has imported about 10 percent of Washington's apricot volume. The Washington apricot crop was short in 2008, but the ten-year production average has been around 4,425 tons.
Apricots sent to Mexico must follow a systems approach of trapping and fruit inspection to ensure that quarantined pests are kept out of fruit shipments. The border is usually opened the first part of May for California apricots, said Barry Bedwell, president of the Grape and Tree Fruit League, who added that they are working to quickly resolve the tariff issue.