The Florida Fruit & Vegetable Association (FFVA) submits the following comments to be included in the record of the May 8, 2001, hearing held by the House Committee on Ways and Means regarding the outcome of the Summit of the Americas, and the prospects and timing for achieving the Free Trade Area of the Americas (FTAA). The following comments address specific FTAA objectives for the agriculture and market access negotiating groups to help ensure fair treatment for Florida's import-sensitive fruit and vegetable sectors.

FFVA is an organization comprised of growers of vegetables, citrus, sugarcane, tropical fruit and other agricultural commodities in Florida. Florida’s unique geographical location in the United States affords growers an opportunity to provide American consumers and export markets with fruits, vegetables and seasonal crops during the months of the year when other domestic producers cannot grow and harvest these crops. Historically, competition for Florida’s fruit and vegetable industry in the U.S. marketplace has come from Mexico, other areas that have farmland suitable for winter production in the northern hemisphere, and from Latin America. In export markets, Florida s crops compete against low-cost, often subsidized producers from Latin America, Europe, and elsewhere.

FFVA's principal concern with the proposed FTAA is that it could lead to further reductions in import-sensitive U.S. tariffs in favor of competitive exporters in Chile, Brazil, Argentina and other western hemispheric countries, creating greater competition in the U.S. market for Florida's fruit and vegetable growers. Accordingly, FFVA's priority objective in the negotiations is to ensure that the tariff methodology adopted to eliminate agricultural tariffs allows for exceptions from tariff elimination for Florida's most import-sensitive fruit and vegetable products. FFVA is on record with the U.S. government in support of similar objectives for the U.S.-Chile Free Trade Agreement.

Florida's growers are skeptical about a FTAA in part because both the North America Free Trade Agreement (NAFTA) and the Uruguay Round Agreement in the World Trade Organization (WTO) have failed to protect Florida's import-sensitive products from increased competition in the U.S. market.

Since the NAFTA Agreement took effect, Florida fruit and vegetable growers have lost significant domestic sales to Mexico of tomatoes, bell peppers, cucumbers and other crops. NAFTA encouraged this increased competition in two ways: first, by reducing U.S. tariffs, making already low-priced Mexican products more competitive; and, second, by encouraging investment in Mexico's agricultural industries from non-traditional sources. The increased investment has substantially advanced Mexico's technology, increased Mexico's production in competitive crops, and reduced per-unit costs of those commodities. These advantages, along with the cost savings derived from the devaluation of the peso shortly after the NAFTA took effect, have significantly increased Mexico's export competitiveness relative to Florida.

Likewise, the Uruguay Round "reforms," which reduced U.S. tariffs across the board, including tariffs on import-sensitive products, have left Florida's fruit and vegetable sectors more vulnerable to imports. While the Uruguay Round has contributed to limited progress in opening foreign markets for Florida tomato and citrus products, losses in the U.S. market have on balance outpaced gains in export markets. Florida's fruit and vegetable exports continue today to face tariff rate quotas and unjustified phytosanitary restrictions.

With competition in the U.S. market increasing, many of Florida's producers have been forced to curtail their operations. Others have closed down altogether. Even import relief actions have not stopped the harm.

A hemispheric-wide free trade agreement will compound this adversity. Chile, Brazil and Argentina are competitive producers and exporters of fruit and vegetables that are also grown in Florida. Imports of these products at duty-free or preferential duty rates pose an immediate threat for Florida's growers.

FFVA therefore requests that high priority be given to the following comments respecting FTAA tariff elimination, tariff-rate quotas, safeguard measures, currency devaluation, and sanitary and phytosanitary disciplines.

In NAFTA, despite the extreme import sensitivity of Florida's fruit and vegetable products, only frozen concentrated orange juice (FCOJ) and, for part of the year, cucumbers received the maximum tariff phase-out period of 15 years provided for under the NAFTA agreement. In many sectors like tomatoes, peppers, and cucumbers, ten-year phase-out periods have proven insufficient to protect against increased imports from Mexico. Consequently, U.S. growers have been forced to spend precious industry dollars to fight back unfair competition from Mexico through antidumping procedures and other trade remedy laws.

The FTAA is a regional trade agreement covering many more countries than NAFTA -- including Brazil, Argentina and Chile, all countries that are highly competitive with Florida's fruit and vegetable sector. These countries currently export melons, lettuce, onions, tangerines/mandarins, and frozen concentrated orange juice to the U.S. market, products that compete directly with Florida production. To ensure that the FTAA negotiations do not lead to increased U.S. imports from these countries of principal fruit and vegetable products, FFVA is asking that a request-offer approach be pursued that explicitly authorizes exemption from tariff phase-out for FFVA's most highly import-sensitive fruit and vegetable products. Although exemptions from tariff phase-out were not granted under NAFTA, there is no WTO requirement that this be the standard for an FTAA, nor is there a policy justification for such an approach, given the greater competitive threat presented by the larger trade agreement. Moreover, FTAA countries like Chile, Argentina, and others are themselves interested in product exemptions for import-sensitive agricultural sectors.

A complete list is attached of FFVA's most important fruit and vegetable products for which special tariff exemptions are requested. Even where Generalized System of Preferences (GSP) benefits are currently being conferred on these products, FFVA considers the GSP exemption to be temporary and the Latin American countries competitive producers of many of these products. Accordingly, Florida's growers and processors oppose granting permanent duty-free access for these products under the FTAA.

A major problem with both the NAFTA and Uruguay Round Agreement for Florida's import-sensitive fruit and vegetable products is the inadequate safeguard mechanisms included in those agreements. These measures have been ineffective in curbing increased imports resulting from the preferential tariff access.

NAFTA contains a special agricultural safeguard that is a volume-based TRQ mechanism that restores the pre-NAFTA tariff on a limited number of products if certain volume targets are met. These safeguards have been ineffective for two reasons. First, they are limited to only a few commodities, leaving many of Florida's import-sensitive products uncovered. Second, the volume ceiling that triggers the safeguard measure is met only at the very end of the season when the extra volumes in the markets have already depressed prices and injured U.S. growers. Although the Uruguay Round contains a priced-based mechanism, the safeguard does not apply to Florida's fruit and vegetable crops, since none of these were subject to non-tariff barrier measures prior to the Uruguay Round negotiations.

Because an FTAA will stimulate imports of perishable, sensitive agricultural products even if they are exempted from tariff reduction, any agreement should include a special safeguard mechanism for agriculture that is (1) broader in product coverage than the NAFTA mechanism (i.e., one that covers all import-sensitive agricultural products); and (2) triggered automatically based on price, not year-end volumes of imports. A price-based mechanism is preferred, since it reacts to import volumes throughout the season whenever they increase because of unfairly low prices, and before irreparable injury has occurred to the U.S. industry. The duration of the safeguard should also be sufficiently long to allow the U.S. industry to adjust to the import surges and the injury caused by the increased imports. Finally, the safeguard mechanism should be structured to include effective relief once the trigger price or volume s reached. Under NAFTA, the relief was to "snap back" to the bound or applied pre-NAFTA tariff rate. A more effective mechanism might be to allow, at least in defined circumstances, a breach of binding to a higher tariff level if necessary to protect the injured U.S. industry.

The U.S. proposal for the FTAA Group on Agriculture does not include a special agricultural safeguard measure. Under the general market access text, the U.S. proposes a hemispheric safeguard measure that would allow tariff increases, but no TRQs. The text reserves the right "to propose at a later date provisions on dispute settlement panel review specific to hemispheric safeguard measures, and sector-specific safeguard regimes." Under this reservation, FFVA urges the U.S. government to explore the inclusion of a special agricultural safeguard to protect import-sensitive U.S. agricultural sectors. Given the great number of countries involved in the FTAA, the competitiveness of many of these countries in the fruit and vegetable sectors, and the attractiveness of the U.S. market, adequate safeguard measures are imperative to protect import-sensitive U.S. fruit and vegetable products.

NAFTA did not include provisions to address currency devaluation. As a result, when Mexico's peso dramatically devalued shortly after the NAFTA agreement took effect, Mexico's exports to the U.S. market instantly became much cheaper and increased significantly, while U.S. exports to Mexico became more expensive and declined. Many of Florida's fruit and vegetable industries experienced this rapid shift in import /export flows and incurred significant losses.

Several of the Latin American currencies not currently pegged to the U.S. dollar also are susceptible to rapid devaluation. To protect against the negative effects on trade, U.S. negotiators should consider ways in which FTAA "protections" could be structured to incorporate appropriate safeguards that would counter increased exports that occur when a country's currency unexpectedly devalues.

Despite the disciplines included in the WTO Agreement on Sanitary and Phytosanitary Measures, access for Florida's fruit and vegetable crops in many export markets continues to be limited by sanitary and phytosanitary restrictions and regulations. Chile and Argentina are two Latin American countries that have limited and delayed access for Florida citrus under the guise of sanitary and phytosanitary concerns.

The U.S. is proposing that FTAA countries collaborate in the WTO to strengthen international standards and to coordinate on data exchange, research and technical assistance. FFVA supports that proposal, but further urges the U.S. government to include disciplines in the FTAA itself that will better ensure that FTAA countries do not use unjustified plant quarantine issues to prohibit or stall access for U.S. agricultural products. Another area of cooperation that should be explored in the FTAA is harmonization of pesticide regulations among the FTAA countries.

The above objectives, especially those addressing tariffs and safeguard measures, are necessary to ensure that U.S. import-sensitive agricultural products from Florida and other U.S. states are not put at risk by a FTAA. FFVA looks forward to working with the Ways and Means Committee and Congress generally to ensure that these goals are achieved.