Washington supplies more than 50 percent of the apples sold south of the border

By DAN WHEAT

Capital Press

The U.S. apple industry is second in value only to pork among the agricultural commodities targeted in the latest Mexican tariffs resulting from a trucking dispute.

Virtually all of those apples come from Washington state.

Counting Mexico's own apples and what it imports from other nations, Washington still supplies more than 50 percent of all apples sold there, according to the Washington Apple Commission.

Washington producers are concerned that a new 20 percent tariff on all apples will be even more harmful than a 47 percent antidumping tariff that ended last March.

It applied only to Red and Golden Delicious apples, and four large companies gained exemptions.

The U.S. exported $207 million worth of fresh apples -- 11.5 million boxes -- to Mexico in 2009 and $23 million worth of dried apples, according to the U.S. Apple Association.

In 1985, Washington exported a mere 26,394 boxes of apples to Mexico, said Todd Fryhover, the apple commission's president. By 1991, that number had jumped to 4 million.

The 1994 North American Free Trade Agreement created even more growth -- a 257 percent growth in all U.S. agricultural exports to Mexico, according to the National Pork Producers Council. Pork exports alone grew 580 percent.

In 2009, the U.S. exported $762 million worth of pork to Mexico, said Nick Giordano, vice president and counsel for international affairs at the Pork Producers Council. About $440 million worth of those pork products are now under tariffs of 5 and 20 percent, he said.

Some $130 million worth of milk and cheese products face tariffs of 20 and 25 percent, according to the National Association of Manufacturers.

California exported 5.5 million boxes of table grapes valued at $60 million to Mexico in 2008. That market is in jeopardy with a 45 percent tariff, and $15 million in annual strawberry sales face a 20 percent tariff, according to the Alliance to Keep U.S. Jobs.

While Mexico added tariffs to goods valued at $994 million on Aug. 17, it removed or reduced tariffs on goods totaling $621 million. It reduced the duty on frozen potatoes from 20 percent to 5 percent.

"I don't know if we will be able to rebound. We are still at a disadvantage with regard to our competitiveness with Canada," said Matt Harris, director of trade for the Washington State Potato Commission.

Northwest pear growers have lost an estimated $21 million and cherry and apricot growers another $4 million in sales from the tariff since March, said Mark Powers, vice president of the Northwest Horticultural Council.

The tariffs might cause the entire market to be lost for some industries if they can be replaced by another supplier, but that's unlikely with PNW apples and pears, Powers said.

The real impact, he said, probably won't be volume but a reduction of price directly hitting Northwest tree fruit growers and thereby impacting communities dependent upon them.

Based on crop and price estimates from the apple commission, Powers estimates a $44 million loss to apple growers in the next year of apple sales to Mexico.

Fryhover said he thinks the loss will be greater. If volume into Mexico shrinks, prices will have to drop for the U.S. domestic market to absorb it, he said.

It's hard to estimate the effect because the Mexican economy is weak and unemployment is high, said Desmond O'Rourke, a retired Washington State University agricultural economist and private consultant.

"Mexico is one-third of Washington apple exports, so it's a really big deal," O'Rourke said.

There's been a lot of discussion but no consensus on the effect of the tariff, said Dan Kelly, assistant manager of Washington Growers Clearing House Association.

Powers said a lot depends on how the fall crop shapes up. Growers are concerned they will have a lot of small fruit. Mexico is a key market for small fruit and Red and Golden Delicious apples, he said.

"It's really important for growers of those varieties and size that Mexico takes a lot of fruit," he said.