TED Case Study: Avocados and Trade

TED Case Studies

MEXICO-U.S. AVOCADO TRADE DISPUTE

CASE NUMBER: 413

CASE MNEMONIC: AVOCADO

CASE NAME: AVOCADO DISPUTE


A. IDENTIFICATION

1. The Issue


On February 5, 1997, the United States Department of Agriculture's Animal and Plant Health Inspection Service (APHIS) was scheduled to publish in the Federal Register a final rule that will allow the importation of Hass avocados from the Mexican state of Michoacan into 19 northeastern states and the District of Columbia from November through February, provided they meet certain safeguards specified by APHIS. This ruling follows an almost two- year struggle between the United States government, the government of Mexico and domestic avocado interests in the U.S. This ruling reverses a more than 80 year-old ban on avocado imports from Mexico.


2. Description


The importation of fresh avocados from Mexico has been prohibited since 1914, when U.S. plant health officials identified avocado seed weevils in Mexican orchards as pests of quarantine significance. In the early 1970's, Mexican officials requested approval to export avocados from the state of Michoacan; later, in 1975, the Mexican government also sought to gain entry for avocados grown in the state of Sinaloa. Both of those requests were eventually rejected by APHIS. Between 1990 and 1992, Mexico submitted three different work plans under which avocados grown in Michoacan could be imported into the United States, One of those work plans resulted in, in July 1993, APHIS approving the entry of Mexican avocados into Alaska under certain conditions. On July 5, 1994, the Mexican government formally requested that APHIS further amend its import regulations to allow importations of Hass avocados into the northeastern United States.

The possible introduction and alleged infestation of insect pests is perhaps the sole issue of contention. The USDA has proposed to lift the ban for their belief that, under certain conditions, the possibility of infestation can be adequately controlled through risk mitigation procedures. Using a "systems approach" to phytosanitary security, APHIS developed a series of complementary procedures all intended to prevent the introduction of avocado seed and stem weevils, an avocado seed moth, and three species of fruit flies that can infect avocados and other host fruits and vegetables.

The "systems approach", developed by APHIS in response to other possible pest infestations, consists of nine safeguards designed to operated sequentially to progressively reduce risk to an insignificant level. The components of a systems approach are:

Host resistance:


Fruit fly infestation of the Hass avocado is not known to occur outside of the laboratory.

Field surveys:

Field surveys for stem and seed weevils and fruit flies are conducted. This includes visual inspection, fruit cutting, and branch shaking at appropriate times during the growing season to determine the presence or absence of pests. Orchards will receive or be denied orchard certification for export on the basis of survey results. Surveys must show municipalities to be free of targeted seed pests at a 95-percent confidence level.

Trapping and field bait treatments:

Trapping and field bait treatments for fruit flies involve 1 trap per 10 hectares. If a fruit fly is detected, trapping level increases to 10 traps in the surrounding hectares -- 1 trap per 5 hectares. If additional flies are found within 30 days, export can continue only under bait treatments of the orchard(s) involved.

Field sanitation practices:

Intended to decrease the chances of weevil or fruit fly establishment, fallen -- i.e., over-ripe -- fruit picked up will be disposed of at least once a week to reduce the risk of fruit fly attacks. Pruning and dead branch removal will help to prevent weevils, particularly stem weevils.

Post-harvest safeguards:

Post-harvest safeguards to prevent fruit flies and other hitchhiking pests will include tamps to cover harvested fruit, timely movement to packinghouse, and screening and double-door systems in place in packinghouse.

Winter shipping only:

Shipping only in the winter will prevent fruit flies and other pest activity -- i.e., breeding and feeding. Import during the winter months in the United States further decreases the risk of pest escape and survival.

Packinghouse inspection and fruit cutting:

Packinghouse inspection and fruit cutting is designed to detect weevils or fruit flies. Detection of pests will mean the shipment can not be exported.

Port-of-arrival inspection:

This inspection is meant to detect pests by 1) sampling at least 30 boxes and/or 30 fruit cut per shipment by an APHIS inspector, 2) verification of phytosanitary certificate, that the shipment is from a certified orchard, and 3) paperwork specifying limited distribution to designated states.

Distribution limited:

Distribution will be limited to 19 Northeastern states and the District of Columbia. Any transported pests will not survive because of cold weather and the lack of suitable hosts.



Besides the risk of infestation to avocado and other host crops in the United States, the real risk is to domestic avocado growers who possess a virtual monopoly on the American appetite for avocados. California has about 6,000 avocado growers and 65,000 acres of avocados. San Diego county produces about half of all US avocados, which were worth $250 million in 1994. Mexico, though, has both higher yields and lower costs. Mexican costs are lower because of the wage gap between farm workers in the richer United States and those in the more impoverished Michoacan region of Mexico. Average Mexican yields are higher than California yields because the climatic conditions are more conducive to avocado growth in Mexico. As a result of the ban on Mexican avocados in the US, a box of US-grown avocados in the US sells for about $30, while a box of Mexican-grown avocados in Canada sells for about $8. If Mexican growers, who produce about 45% of the world's avocados, are allowed to compete in the US market, they could gain an export market estimated as highly as $60 million per year.

Before the USDA's Animal Plant Inspection Service issued its final rule on February 5, the California Avocado Commission, representing about 6,000 growers of a crop worth nearly $250 million a year, did everything but throw avocados to block the rule. California growers paid for full-page advertisements questioning the USDA's scientific conclusions in issuing the rule. The avocado commission played an active role in seven public hearings and filed a 200-plus page analysis opposing the rule. It rallied 1,500 growers to storm a USDA hearing. It had members of the California congressional delegation intercede with regulators.

After two years of debate, two studies and 1,751 out of 2,000 comments on the rule opposing the change, the government decided to make the change despite its negative ramifications. Those who commented in support of the proposed rule change, many cited the need for the United States to lead the way in the elimination of non-tariff barriers, which is how those outside the United States would characterize this import standard.

One major catalyst for change was agricultural exporters. The department maintained that the United States could not pit itself against the Mexican government any longer because the avocado ban was holding up exports of other US farm products. Exporters feared that the USDA's possible continued prohibition of Mexican avocados will result in a regulatory standard that will be adopted by Mexico, and perhaps other countries, thereby affecting access for US products. Industry officials feared that failure to adopt the systems approach will encourage Mexico to adopt similar standards of protection for US wheat, apple, peach, cherry, and other exports to Mexico. This could have caused major disruptions to US agricultural trade with Mexico.

3a. Related Cases

TOMATO BALLAST MEDFLY
SUGAR HOOF
APPLE BANANA
NEMATODE NAFTA

3b. Keyword Clusters

4. Draft Author: Mike Strollo (February, 1997)

B. LEGAL Clusters


5. Discourse and Status: DISagreement and COMPlete

True free trade does not exist between Mexico and the United States in avocados, or most agricultural products, a goal sought by the North American Free Trade Agreement. Until such a time, there will continue to be trade friction between Mexico, the United States and Canada.

We should also expect similar trade arrangements like the one on avocados; namely the widely suspected trade-off between approval for the importation of avocados and Mexican approval for the renewed importation of US cherries. Californian Avocado Commission (CAC) chairman Mark Affleck contends that the Californian Avocado Commission was trade-off to mollify other interests. The CAC gave a copy of a document, dated 5/28/96, to the San Diego Union-Tribune it says was written by the U.S. ambassador to Mexico. The note indicated that the decision to allow Mexican avocados into the United States was decided long ago, contrary to stated policy. The question remains as to whether the avocado agreement was decided upon on its own merits. Mexican officials have repeatedly tied US inaction on admitting Mexican avocados to issues affecting US exports of a range of other agricultural products to Mexico, including apples, peaches, nectarines and cherries.

6. Forum and Scope: NAFTA and REGIONAL

7. Decision Breadth: 2 (USA, MEXICO)

8. Legal Standing: Treaty

C. GEOGRAPHIC Clusters


9. Geographic Locations


10. Sub-National Factors: Yes

11. Type of Habitat: DRY

D. TRADE Clusters


12. Type of Measure: Import Standard [IMSTD]

13. Direct vs. Indirect Impacts: DIRect and INDerect

The measure will have direct impacts upon the avocado trade in the United States and Mexico. If the systems approach does in fact eliminate the allegedly possible infestation that the CAC suggests will happen as a result of the lifting of the ban, it may clear the way for imported avocados entrance into the rest of the U.S. market.

The measure will also have indirect effects on the agricultural trade in other commodities exported by the United States. With this agreement, cherries, apples, peaches and other U.S. agricultural products will be given freer access to the Mexican market.

14. Relation of Measure to Environmental Impacts:


The measure may have possible indirect environmental impacts depending upon the effectiveness of the systems approach that the USDA has adopted concerning the entire importing process that Mexican avocados will have to go through to reach the U.S. market.

15. Trade Product Identification: AVOCADO

16. Economic Data:

AVOCADO COMPARISON
COUNTRIES Weighted Avg. Wholesale Price Retail Price Avg. Yields Acreage Total Production
Mexico $0.28 per pound $8.00 (In Canada) 7.6 tons per hectare 220,000 acres 696,000 tons
United States $0.48 per pound $30.00 (In U.S.) 5.0 tons per hectare 65,000 acres 151,650 tons

Studies show avocado prices could drop 10% if 30 million Mexican avocados hit U.S. supermarkets. The opening of trade between the U.S. and Mexico could create a $60 million export market for the Mexicans and significant competition for U.S. growers.

17. Impact of Measure on Trade Competitiveness: HIGH

18. Industry Sector: Agriculture

19. Exporter and Importer: MEXICO and USA

E. ENVIRONMENT Clusters

20. Environemental Problem Type: Possible Infestation

21. Name, Type, and Diversity of Species

PEST SPECIES CLASSIFICATION
Name Type Diversity
Fruit Fly (Anastrepha ludens) Animal/Mandible/Insect N/A
Fruit Fly (A. serpentina) Animal/Mandible/Insect N/A
Fruit Fly (A. striata) Animal/Mandible/Insect N/A
Avocado Weevil (Conotrachelus perseae) Animal/Mandible/Insect N/A
Avocado Weevil (C. aguacatae) Animal/Mandible/Insect N/A
Avocado Weevil (Heilipus luari) Animal/Mandible/Insect N/A
Avocado Weevil (Copturus aguacatae) Animal/Mandible/Insect N/A
Avocado Seed Moth (Stenoma catenifer) Animal/Mandible/Insect N/A

22. Impact and Effect: HIGH and ALL AGRICULTural Crops

These pests would present a significant pest risk to U.S. crops if introduced, particularly in the southeastern and southwestern United States. APHIS, however, believes that with its systems approach, the possibility of infestation is negligible.

In the past, California has been beset with problems caused by the Mediterranean fruit fly. Since 1975, 12 medfly infestations have cost the state more than $170 million in eradication efforts and millions of dollars more in lost agricultural exporting revenue. California's $17 billion-plus agricultural economy is particularly vulnerable to the medfly: the state's climate is temperate, virtually matching that of the insect's mediterranean homeland; and its flora is extensive, offering the fly more than 31 million acres of commercial farmlands and innumerable gardens and fruit trees.

The female medfly drills nearly invisible holes in the fruit's skin and proceeds to lay up to a thousand eggs in her average 40-day life span. The eggs turn to larvae, which then dine on -- and destroy -- the fruit's pulp.

To combat infestation, California growers have utilized a number of methods concurrently. Officials spray the area with malathion, a pesticide, strip fruit from infested trees, and release hordes of sterilized male flies that they hope will breed the wild flies out of existence.

Californian growers also combat perceived infestation by vociferously maintaining that each appearance of the medfly is the result of medfly eggs or larvae hitchhiking inside fruit illegally mailed or carried into the state. Because much of California's produce is shipped overseas, especially to Japan and other Pacific Rim countries, federal and state officials have always gone to great lengths to reassure buyers that California is medfly-free and its fruit pure. If importers came to believe that the medfly was a permanent California resident instead of an occasional tourist, they would place permanent restrictions on the state's fruit. Growers would have to install expensive equipment to kill any possible larvae by freezing; they also might have to use high quantities of expensive pesticides, which carry the additional stigma of being anethema to California's environmentally conscious citizens.

23. Urgency and Lifetime: HIGH and LIMITED (Lifetime of Bug)

24. Substitutes: LIKE Products

F. OTHER Factors

25. Culture: NO

26. Trans-Border: NO

27. Rights: NO

28. Relevant Literature:

Biberman, Thor Kamban. "Avocado Growers Fear Proposal to Lift Mexican Ban," Daily Transcript, 11 July 1995.

Groves, Martha. "Bracing for an Invasion," Los Angeles Times, 24 December 1996.

"Hass Avocados from Mexico," US Department of Agriculture Animal and Plant Health Inspection Service. Docket No. 94-116-3, 1994.

Lindquist, Diane. "Avocado imports: a done deal?" Copley News Service, 1/24/97.

Marcus, Ruth. "From Hill Aide to Foreign Lobbyist: Tale of an Avocado Advocate," The Washington Post, 18 June 1996. Section A: p. 11.

"Playing it dirty," The Economist, vol. 329, #7842. 18 December, 1993: pp.28-9.

"Mexican Tomatoes and Avocados," Skrzycki, Cindy. "It's a Buggy Ride to Disaster, Say California Avocado Growers," 14 February 1997. The Washington Post, Section G: p. 2.

May, 1997