An opinion by Allan Golombek found in Real Clear Markets
Florida tomato farmer Tony DiMare has a complaint about NAFTA. He says Mexican farmers are trading unfairly. How? By developing ways to produce tomatoes year-round and provide them in all seasons to consumers, at lower prices than many Florida farmers can afford to charge. But that isn’t trading unfairly; it’s trading efficiently. And isn’t that the goal of free trade?
In an interview with CNBC, DiMare inadvertently touched on the key question in any debate between free trade and protectionism: Is the principal purpose to coddle producers, or is it to ensure the best deal possible for consumers? Some tomato farmers may regard it as unfair when their Mexican counterparts manage to turn what was once open farm acreage into a greenhouse environment to facilitate year-round production. But consumers in Florida and all of the other states no doubt consider it more than fair. The end result: They can get a wider choice of tomatoes, at a lower price than they would otherwise pay, 52 weeks of the year.
Make no mistake, most American farmers and farm organizations support NAFTA. In fact, they consider it a godsend, mainly because it has been. In its 25-year life, NAFTA has delivered unprecedented benefits to American farmers and the rural communities that depend on them. In 1993, American farmers exported $8.9 billion to Canada and Mexico. Last year they exported more than $43 billion. Those exports have been vitally important to sustaining farms, jobs, and rural communities, particularly in recent years when farm incomes have declined.
What some seem to often forget is that before NAFTA eliminated them, Mexico’s tariffs were considerably higher than U.S. tariffs. If NAFTA were to go, those high Mexican tariffs would return. How high a tariff wall would American farmers suddenly be faced with? Just consider five examples: Up to 75 percent on chicken, 45 percent on cheese, 25 percent on beef, 20 percent on almonds, and 10 percent on pork.
At the same time, U.S. tariffs, although lower than Mexico’s, would also be resurrected. In other words, Mexico would likely respond to the end of NAFTA by imposing a huge tax on Mexican consumers every time they buy food from the United States. The United States presumably would respond by imposing a tax on American consumers every time they buy food, such as tomatoes or avocadoes, from Mexico. Basically, both countries’ negotiating teams are holding a gun to the heads of their own consumers and threatening to pull the trigger. If you like being a hostage, you must love being a consumer during this free trade negotiation.
Which brings us back to the question that DiMare inadvertently raised. Is the purpose of a market economy to cling to domestic jobs by imposing tariff and non-tariff barriers to keep out competition? Or is it a market economy’s purpose to keep down prices and increase consumer choice by encouraging more competition?
If Mexican farmers are able to produce tomatoes year-round, that serves the needs of consumers, including American consumers. What should U.S trade negotiators do – demand that Mexican farmers be less efficient? That would be like telling a U.S. company not to use artificial intelligence, or telling a Japanese company not to use lean production methods, because it allows them to produce more efficiently. Or telling Henry Ford not to use the moving assembly line to produce the Model T. Doesn’t it just make more sense for companies outside the United States to embrace artificial intelligence and companies outside Japan to embrace lean production methods, and for auto companies to embrace each other’s best production methods, as they have?
Ultimately, of course, trade deals are negotiated by politicians and their representatives. Politicians care more about jobs than they do about the interests of consumers, because jobs are easier to boast about. And of course, a job is more central to people’s ability to survive and even to their self-identity. We may consume a thousand different goods and services, but we only produce one, and that one is more important to us than all of those we buy.
But that is why it is all the more important for politicians to provide leadership. At the very least, they most make it clear that trade agreements exist to encourage efficiency, not discourage it. And they must refrain from insulating domestic producers from competition at the cost of exposing domestic consumers to higher costs and fewer choices.
Allan Golombek is a Senior Director at the White House Writers Group.
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