Tomatoes are the latest Canadian trade product called "unfair" by our Southern neighbours.
We say tomato, they say underpriced-oversubsidized-foreign-product-that-threatens-the-livelihood-of-the-American-farmer.
While the Canadian Lumber industry is still reeling from a U.S. government decision to impose a 20 per cent tariff on Canadas softwood lumber exports an industry worth $10 billion American greenhouse farmers are asking the U.S. Department of commerce to impose a duty on Canadian exports of hothouse tomatoes.
Although this may seem laughable compared to the layoffs and plant closures that the softwood tariffs are expected to cause, hothouse tomatoes were a $244 million industry for Canada in 2000, and represented $98.2 million in revenues for B.C.s greenhouse farmers.
Until American hothouse farmers sounded the alarm bells, hothouse tomatoes were a bright spot on the agricultural scene, with the value of the market increasing every year since 1998, according to B.C. Stats. As recently as 1996, Canada only exported 21.8 million kilograms of hothouse tomatoes south. By 2000, that quantity had increased to 101.4 million kilograms. There are no statistics dealing specifically with the hothouse tomatoes, but the majority of export tomatoes especially from B.C. are greenhouse grown.
In 2000, Canadian farmers grew 182.4 million kg of greenhouse tomatoes, and 519.2 million kg of the field variety 99 per cent of which were grown in Ontario. Ontario was also responsible for 72 per cent of Canadas greenhouse tomatoes.
The American farmers claim that Canadian farmers are essentially "dumping" underpriced tomatoes on the market, claiming that Canadian hothouse growers are selling their wares in the U.S. at prices below production costs and domestic costs, and that this practice is inflicting "material injury" on the U.S. greenhouse industry.
The U.S. International Trade Commission has ruled to support this claim of "material injury," and the U.S. Department of Commerce is initiating an anti-dumping investigation.
Central to the whole argument is whether tomatoes grown in the greenhouse should be lumped together with tomatoes grown in the field. Canadian tomato growers are arguing that both hothouse and field tomatoes, fresh or chilled, should be counted together, since the greenhouse tomatoes must compete with field tomatoes and vice versa. The price of one tomato affects the price of another, and a low price for field tomatoes means a lower price for the hothouse variety.
American greenhouse tomato growers argue that the two varieties cannot be lumped together, that the way they are grown is important when differentiating between products. Hothouse tomatoes cost more to produce, they are marketed differently, and there are real inherent physical differences that matter to customers.
Therefore, they argue, the higher cost of production and a higher price at the grocery store have to be justified in order to market tomatoes as "hothouse." Although they always cost more, they still sell because they are better tasting, better formed, and were produced with fewer (if any) pesticides and noxious chemicals.
Its a lot to take, especially if youre still trying to wrap your head around the idea a tomato isnt a vegetable but a fruit the important thing to keep in mind is that both the Canadian and U.S. points of view, are correct.
Its true that some people buy hothouse tomatoes for their physical qualities, never mind the fact that theyre sometimes twice the price of field tomatoes. Its also true, however, that fewer people would buy hothouse if the price were three or four times as much as field grown; and that seasonal changes are important in Canadas limited growing season. The arrival of local field grown crops therefore also has an impact on price, and many consumers would argue that local crops are as fresh and perfect as the hothouse variety.
As a result, the reduced demand for greenhouse tomatoes will drive down the price in order to stay competitive.
Canadian tomato growers argue that Americans are growing tomatoes in such large volumes, that they have effectively driven down the price of all tomatoes, and that it was necessary to reduce the price of Canadian greenhouse tomatoes to compete with this level market saturation.
"In fact, Canadian producers have suggested that perhaps Canada should investigate the American field tomato industry for dumping their products on Canadian markets," says B.C. Stats, in a report titled Attack of the Canadian Tomatoes.
B.C. has the largest organized group of greenhouse vegetable growers in North American, with 55 of the largest producers combining to form the B.C. Hot House Growers Association. They could not comment on the U.S. call for trade penalties on Canadian hothouse tomatoes, but will have an opportunity to present their case to the U.S. Department of Commerce when the time comes. They will likely be backed up by Agriculture and Agri-Food Minister Lyle Vanclief.
This is getting ridiculous.
The North American Free Trade Agreement, or NAFTA, has been anything but free for Canada since we signed a pact with the U.S. and Mexico in 1994.
Since then weve been accused of dumping everything from cheap steel to cheap woodchips to cheap pork-bellies to cheap softwood on the U.S. market. We are being also being accused of dumping cheap entertainment on them, and American companies in the movie industry are asking the U.S. government to impose countervailing duties i.e. tariffs on movie and television productions filmed in Canada.
Were also scuffling over the price of our wheat, despite the fact that wheat farmers are already at rock bottom trying to compete with cheap wheat from Russia and Africa.
The Council of Canadians is also petitioning Canadian trade minister Pierre Pettigrew to release the details of a $250 million lawsuit against Canada by American-based courier UPS that alleges that Canada Post is a monopoly that discourages free trade. Under Chapter 11 of NAFTA, companies have the right to sue governments for lost revenues if they feel government is protecting an industry from competition.
Some of the scapegoats in these complaints are our low dollar, high agricultural, business and social subsidies, provincial business incentives, and public ownership of lands, forests and corporations.
If so many of our market segments are dumping, or otherwise engaged in unfair business practices against the U.S., you would have to wonder why the Americans entered into a free trade agreement with Canada in the first place. Come to think of it, how come Canada has yet to level a similar accusation against the U.S.? Theres only case on the books of a Canadian company suing the U.S. for protectionism, and that will likely be tied up in the courts for years to come.
It appears that the U.S. is only in favour of free trade when it benefits American companies, although Canada hasnt done a very good job of standing up for itself. When it comes to economics, were somewhat cowed going into negotiations with the U.S., the largest economic power in the world.
Thats not to say that no Canadian companies are benefiting from the NAFTA arrangement: there are dozens of qualified success stories. But ever since we signed that agreement weve been through a recession and watched the value of our dollar compared to the U.S. greenback drop by more than 15 cents. Foreign ownership of the Canadian economy has increased significantly, from 21.7 per cent to 22.7 per cent between 1997 and 1998 alone. That number is expected to increase next year if and when the federal government reintroduces a financial services reform package that would allow a single shareholder (including a foreign company) to control 20 per cent of a Canadian bank, up from the current allowance of 10 per cent. Eatons has already gone under and The Bay is threatening to do the same, while American companies like Sears and K-Mart are popping up just about everywhere.
Its been suggested by more than one union or citizens group that the majority of companies that have been most successful are the multi-nationals who can use free trade to lower costs by putting regions of the U.S., Canada and Mexico into a bidding war to be their suppliers and hosts.
Unique companies and companies that peddle resources like oil and energy can thrive under NAFTA, but for products that are common to all three members, companies are struggling to get ahead.
If the American greenhouse farmers were telling the truth and B.C.s hothouse farmers were indeed selling their wares below production costs, you would expect the Canadian growers to go under, when in fact theyre thriving. In truth, theyre selling below American production costs. Our dollar is lower, our costs are lower, and greenhouse operators in B.C. and the rest of Canada have a head start on greenhouse operators to the south.
According to B.C. Stats, the farmers have developed efficiencies in their operations to lower production costs over time and improved crop yields to lower costs even further.
The Americans say that the increased Canadian market share in the U.S. is proof of dumping, while Canadian growers say that all that proves is that free trade is working.
The Americans say that this alleged dumping is whats causing the cost of tomatoes to drop, while the Canadians suggest that the abundance of field tomatoes grown down south is the culprit.
The U.S. has shown in the past that theyre more than willing to slap tariffs on Canadian products if they feel theyre putting American businesses at a disadvantage, and theres no reason to expect any less with tomatoes. Even if they side with the Canadian perspective, Canadian hothouse producers will still be out millions, even tens of millions, in legal costs. To recoup those losses, tomato producers will have to raise prices, which will have the same effect as a tariff. Its lose-lose.
How do you like them tomatoes?