U.S. Apples Are Not So Red Delicious

A. The debate centers around the exports of US "red delicious" and "golden delicious" apples into Mexico, which according to the Mexican government have flooded its domestic market. On September 1, 1997 the Mexican government imposed anti-dumping duties on the above mentioned products.

B. Other disputes in this sector include avocado and tomato. The anti-dumping duties have been set by Mexico's trade ministry as a result of an investigation which began in March and concluded that the apples, which have become increasingly visible in Mexican supermarkets, "have come into the country under conditions of dumping" (Financial Times, September 1997).

C. Under this agreement, US apples imports in 1994 were subject to a 15% tariff, which was to be gradually reduced by 2 percentage points a year.

E. These duties have been provisionally set at 101.1% (Northwest Horticultural Council) for both types of apples and cap the latest in a series of disputes which have upset the multibillion dollar bi-lateral agricultural trade.

D. The investigation that had been sought by the Chihuahua State Fruit Growers Association alleges that American exporters have been selling the fruit at below its cost since 1992. Such an investigation has confirmed that trade in the agricultural sector between Mexico and the US has become one of the most sensitive areas of the North American Free Trade Agreement (NAFTA).

Assignment 7. Working in groups of 3−4, discuss what the continuation of the anti-dumping story might have been.

Assignment 8. Now read the continuation of the anti-dumping case study to see if your scenario was right.

After a three month preliminary investigation, Mexico's Ministry of Trade and Development concluded that the pricing on imported US apples caused damage to Mexico's national apple industry. As a result of Mexico's preliminary finding, representatives of the US apple industry were given 30 business days, or by April 21, 1997, to respond to a set of questionnaires which were supplied by Mexico's government. According to the Northwest Horticultural Council (NWHC), the US apple industry responded to the Mexican government's official anti-dumping questionnaire within the prescribed deadline of April 21 by providing detailed sales information for the period under investigation. However, five importers also submitted responses to the questionnaire which, with respect to one importer's submission, could not match with the industry's response. In essence, the Mexican government requires that both the information provided by the US apple industry and the information provided by the Mexican importers match 100%. This lack of reconciliation raised a red flag to the Mexican government.

This discrepancy is the key to the case as the Mexican Ministry of Commerce chose to disregard the US' industry submission and, instead, based its preliminary determination on information supplied by the Chihuahua State Fruit Growers Association − the petitioner in this case. As a result, the Government of Mexico on Monday September 1, 1997, announced its preliminary determination in the anti-dumping investigation of US Red Delicious and Golden apples by imposing 101.1% compensatory duty on imports of those apple varieties. According to the NWHC, a "carton of apples with declared value of $20.00 is now subject to duties of $4.00 (20% import duty) and $20.02 (101.1% compensatory), bringing the total value to $44.02. Importers may be allowed to post a bond on a fraction of its preliminary compensatory duty owed.

On September 26, the NWHC filed a motion in Mexico's civil court seeking an injunction against the Mexican government's September 1 imposition of the 101.1% compensatory duty. However, on October 7, 1997 a civil court in Mexico City denied the US industry's legal motion seeking an injunction against the Mexican government's September 1 imposition.

The NWHC continued to aggressively contact US government agencies to seek legal and political help in ending Mexico's compensatory duties and to be able to restore access to its largest export market. As a result of the political efforts, the US Trade Representative and Department of Commerce officials met with their counterparts from Mexico's trade ministry on October 8 and again on October 20 in Washington. During these meetings, the Clinton Administration expressed their objections to Mexico's trade ministry's procedural handling of its anti-dumping investigation.

Resulting from pressures by the US government, Mexico's trade ministry’s officials scheduled a visit to Washington state for the week of November 10, 1997 to verify the detailed marketing information supplied by Price Cold Storage and Washington Fruit & Produce which had been part of the US industry's submission of evidence in the case.

On November 24, 1997 the Northwest Horticultural Council made public the results of the Mexican verification audit of the US apple industry as part of the government's anti-dumping investigation of Red Delicious and Golden Delicious apple imports from the US. In the announcement, the Council stated that Mexico's Secretariat of Commerce and Industrial Development concluded on a post-audit report that "officials did not find any significant differences between the information reported to the Secretariat and that registered in the accounting records". This last finding should conclusively prove that no dumping occurred, and that US apple growers' access to Mexico's market should be immediately and fully restored. In theory, the Mexican government should issue its final determination in this case and it compensatory duties should be removed to pre-September 1, 1997 levels. In practice, it has not happened. The NWHC stated in its press release dated November 24, 1997 that "there's absolutely no justifiable reason to delay the issuance of a final determination in it case" and that "Mexico's imposition of this unjust, prohibitive duty should be immediately eliminated before any additional economic harm is done to our apple industry."

The question remains as to whether the sanctions on US apples are legitimate. In the past, both the governments have repeatedly linked the inaction of one government to the sanctions on the other's products. It has been suggested that the Government of Mexico chose the apple industry in order to get the US government to address the avocado case. Mexico is the largest importer of US apples and consequently a market that if closed, it would directly have a major effect in the US apple industry. It appears that this tactic has played well for Mexico as the US apple industry wasted no time in contacting their Representatives to address the issue.

(Source: TED Case Studies, http://www.american.edu/ted/ applemex.htm)

Have you heard of other similar scenarios of anti-dumping cases? What countries/companies were involved? What sanctions were imposed?

Assignment 9. Negotiation. Divide into 2 groups (one group represents Mexico's Ministry of Trade, the other consists of the representatives of the US apple industry). You discuss the situation and try to reach a consensus.