Mexico's Berry Bounty Fuels U.S. Trade Dispute

By Robbie Whelan Features Dow Jones Newswires

SAYULA, Mexico -- An explosion in berry farming here, fed by a growing American obsession with breakfast smoothies and antioxidant-rich fruits, is fueling one of the thorniest disagreements in the talks to redo the North American Free Trade Agreement that resume this coming week.

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"Ten years ago, all the fields were for vegetables," said Héctor Gómez, production manager for a raspberry farm here. "Now, all we grow is berries....It's just much more profitable."

The value of Mexico's berry crops has grown ninefold in a decade to $23.4 billion in 2017, according to Mexico City-based agricultural consultant GCMA. The amount of land planted for berry crops has more than tripled over the period to 88,000 acres.

American farmers, however, complain that their Mexican rivals enjoy unfair advantages, including low-cost farm labor, state subsidies and a year-round growing season that lets them dump cheap berries on the U.S. market when the two countries' growing seasons overlap in the late spring.

The issue has emerged as a key bone of contention in Nafta renegotiations, which enter their fourth round on Wednesday in Washington. U.S. President Donald Trump has highlighted agriculture as a crucial area where the 1994 free-trade accord needs to be improved.

American farmers in Florida, Georgia, the Carolinas, Texas and California say that the Mexicans often sell berries in the U.S. at discounts of as much as 25% below production cost.

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"Nafta has hurt me a lot more than it's helped me, by allowing Mexico to dump cheap berries here, much more than I've been able to sell to them," said Steve McMillan, a 64-year-old grower from Enigma, Ga., who has about 60 acres of blackberries on his seventh-generation family farm.

Mr. McMillan said that Mexican-produced berries sell for between $5 and $10 per case (a case is 12 six-ounce cups of berries) in the early summertime. "We have to sell them for $12 just to break even," Mr. McMillan said, mainly because of the cost of farm labor, which can cost about $200 per picker per day. Farm workers in Mexico typically make about one-tenth what workers in the U.S. earn.

During Nafta talks last month in Ottawa, the U.S. team introduced a proposal to make it easier for American producers to bring antidumping cases in the perishable and seasonal fruit and vegetable sector.

Under current law, farmers have to prove that unfair competitive practices hurt them over the course of a full calendar year. The U.S. proposal would let growers bring an antidumping case before mediators based on a single, monthslong growing season.

"This would be a tool for these industries suffering an injury or damage to assert their rights under the trade law," said Reggie Brown, executive vice president of the Florida Tomato Growers Exchange, a farmers' and shippers' group.

Mexico's Nafta negotiators rejected the proposal, according to people familiar with their thinking. Mexico's lead Nafta negotiator, Kenneth Smith Ramos, said the U.S. wanted to "focus in an arbitrary manner only on the months when Mexico exports the most." Senators from Mexico's ruling party said this past week they would reject any deal that made it easier for U.S. farmers to launch anti-dumping investigations for seasonal produce.

The berry dispute also highlights divisions between small and large U.S. growers. In July, after the U.S. Trade Representative called to eliminate third-party mediation panels to resolve trade disputes in favor of adjudicating them in domestic courts, many large American fruit and vegetable produce suppliers objected.

Such producers, which operate farms in all three Nafta countries, worry that U.S. protectionist measures would hurt their cheap Mexican production and could spark retaliatory duties by Mexico and Canada.

The mediation panels "can close the border to our products with only a decision from a U.S. court," said Mario Andrade, president of Splendor Produce, a large Mexican berry grower, where Mr. Gómez, the production manager, works. "For that reason, it's really important to maintain clearly defined rules on disputes."

A group of their executives traveled to Mexico City during Nafta talks in early September to advocate keeping in place the pact's protections of tariff-free trade for agricultural products.

Kevin Murphy, chief executive of Driscoll's Inc., the world's largest berry company, said the U.S. proposals could hurt growers in all three countries, as well as U.S. consumers by causing prices to rise.

"Over the last 25 years, Nafta has enabled the rapid growth of fruits and vegetables in the U.S....(including) year-round produce," Mr. Murphy said. "It would not have been possible without the production from Mexico."

Here in Sayula, where dozens of berry farms are preparing to harvest their third crop of the year, Splendor Produce has expanded production by roughly 30% each year over the past nine years. That owes to more resilient plant varieties, consistently low wages, and rising demand from U.S. consumers.

The company estimates that more than half of the town's residents work in the fields, pruning berry bushes under plastic tunnels that keep the fruit from burning in the suffocating heat and packing crates to be shipped to the U.S.

"Everyone is drinking licuados these days," Mr. Gómez said, using the Spanish word for smoothies. "Growing berries is a better business than avocados or corn."

--William Mauldin in Washington and Juan Montes in Mexico City contributed to this article.

Write to Robbie Whelan at robbie.whelan@wsj.com

(END) Dow Jones Newswires

October 07, 2017 07:14 ET (11:14 GMT)