NAFTA Changes Could Put A Dip In Guacamole Sales
The Trump administration has announced plans to revamp NAFTA — the 23-year-old North American Free Trade Agreement between the U.S., Mexico and Canada. Unraveling the complex relationship between the three countries will not be easy.
To get a sense of what may happen if the North American Free Trade Agreement goes away, look at what happened last year when a group of growers in Mexico slowed down the supply of Haas avocados to the U.S. market.
Mikey Knab, the director of operations at Ponce’s restaurant, was trying to console customers a week after his supply of Mexican avocados briefly dried up.
“As soon as you see people you have to let them know because half of our menus is avocado,” he told KPBS in October.
Avocados have become so popular so quickly that it is hard to remember that, for most Americans, avocados have been a staple for less than 20 years. Californians have always loved avocados, but it took NAFTA to generate the volume that brought them to most places in the U.S.
The Texas-based trade group Avocados From Mexico reports that by 2014, Americans were consuming 1.7 million pounds of avocado, which is more than double the amount eaten in 1997. To fill the demand, Americans now import 60 percent of their avocados from Mexico.
Before NAFTA passed in 1994, avocado imports were banned by the U.S. In 2007, California was the last state to lift the ban and allow Mexican avocados.
Even minor disruptions to the supply of popular goods can lead to public outcry. Around the time of the Super Bowl, people on Twitter started blaming the new president for the price of avocados.
San Diego County produces roughly 40 percent of California’s avocado crop. The state is the largest avocado producer in the U.S., but California produces a fraction of the avocados of Mexico. The Hass Avocado Board estimates California will produce about 71,000 tons of avocados in 2017, while Mexico is expected to produce 353,931 tons.
A USDA study from June found “NAFTA fostered deep integration of North American agricultural markets.” Each side has benefited from the produce trade. The U.S. sold $17.7 billion in farm products to Mexico.
Mexico is America’s largest export market for apples, pears and corn.
Mexican avocados will not automatically disappear from American shelves if NAFTA is repealed. Trade between the two countries would still be governed by the World Trade Organization. Prices are likely to go up as old duties on imported produce, which are not allowed under NAFTA, reappear.
The import duties on avocados will go from zero to about 11.2 cents per kilogram, according to Steve Zisser, an attorney who specializes in trade law. He estimated that would add $2,032 to the typical 20-ton shipment from Mexico. That would not break the bank for growers, he said.
Zisser is more concerned about ideas being floated in Washington to create new taxes and duties on imported projects.
Congressional Republicans are looking at cutting the tax on exports and imposing a 20 percent tax on imports, dubbed a border adjustment tax. Trump campaigned on a straight up 35 percent tariff on goods coming from Mexico.
There are early rumblings that Mexico may also retaliate.
Mexican Senator Armando Rios Piter spoke recently at UC San Diego. The senator has a bill that would encourage Mexico to buy corn from places other than the U.S. — a move that would hurt farmers in the Midwest.
“Well there is a lot of uncertainty,” Piter said. “One of the pillars of NAFTA was certainty, and now there is a lack of it because you have a president who uses Twitter to generate instability — to NAFTA and to the relationship.”
Secretary of Commerce Wilbur Ross told Bloomberg News that he plans to “fix NAFTA” to make it a “fair deal, not just a trade deal.” At the moment, we do not know exactly how any of those ideas will play out.