After a year, fallout still remains from trucking dispute

By DAVE WILKINS
Capital Press

Failure to resolve a trucking dispute between the U.S. and Mexico is taking a toll on U.S. potato farmers, industry officials say.

Frozen potato exports to Mexico plummeted about 50 percent from April-December 2009 compared to the same nine-month period in 2008, said John Keeling, executive vice president of the National Potato Council.

The value of exports dropped from $64 million in 2008 to $31 million in 2009, he said. Volume dropped from about 65,000 metric tons to 33,000 metric tons.

The sharp decline is the result of a 20 percent tariff imposed by Mexico, he said.

Frozen potato products were one of 90 U.S. manufactured and agricultural products hit by retaliatory tariffs after Congress cut off funds for a U.S.-Mexico cross-border trucking program in March 2009.

America's loss has been Canada's gain, Keeling said. Exports of Canadian frozen processed potatoes to Mexico have increased about 50 percent over the same time.

The processors that make frozen potato products operate plants in both the U.S. and Canada. So it's a simple matter for them to ship product from Canada instead of the U.S. to avoid the 20 percent tariff, Keeling said.

The amount of U.S. potatoes grown for frozen processing is expected to decline this year, in large part because of the tariff, Keeling said March 9 in a media conference call.

The decline has been keenly felt in the Pacific Northwest, the nation's top potato processing region.

"We already have seen some shift in acreage reduction and we expect those acres to move to Canada," Keeling said.

If the Mexican tariffs continue, "it will begin to have a more permanent impact on the economic activity in the Pacific Northwest in particular," he said.

It's already affecting potato processing volume, Keeling said.

ConAgra announced in late February that it plans to shut down one french fry line at its potato processing plant in Twin Falls, Idaho, this fall, in part because of weak market demand.

If the trucking dispute with Mexico isn't resolved, it will continue to have a negative impact on the U.S. potato industry, Keeling said.

"We will see in potatoes the loss of the other 50 percent of our market share (in Mexico) in the next 10 months if something's not done," he said.

March 10 marks the one-year anniversary of Congress' decision to terminate a cross-border trucking pilot program with Mexico. Industry officials said the end of the program violated the North America Free Trade Agreement and it should be reinstated.

"This continued inaction is hurting the Washington potato industry and directly adding to a reduction in acres and reduced hours at processing plants," Ted Tschirky, a Connell, Wash., grower and chairman of the Washington State Potato Commission, said in a news release.

Mexican trucks are allowed to operate within about 25 miles of the U.S.-Mexican border. Under a U.S. Department of Transportation pilot program begun in 2007, limited Mexican carriers were allowed access to all U.S. roads.

Language to end the program was included in an appropriations bill approved by Congress a year ago.

The retaliatory tariffs imposed by Mexico are costing U.S. manufacturers, farmers and ranchers about $2.4 billion in lost exports each year, said John Murphy, vice president of international policy for the U.S. Chamber of Commerce.

"The tariffs are essentially prohibitive tariffs," Murphy said. "They're high enough that they really force U.S. products out of the market."

Allowing Mexican trucks full access to U.S. roads isn't a safety issue, Murphy said.

"These Mexican rigs coming in under the pilot program were probably the most inspected in the world," he said.

DOT officials said earlier this month that they're very close to a proposal that they think will meet all safety concerns.

"That's great, but we can't wait and wait and wait," Murphy said. "On trade, when we stand still, we fall behind."