UPDATE 1-U.S., Mexico reach tomato deal to avert trade war
(Updates with tentative deal)
WASHINGTON, Feb 2 (Reuters) - The U.S. government and Mexican tomato growers reached a tentative agreement on Saturday that reduces the threat of a costly trade war stemming from a U.S. decision last year to pull out of a 1996 bilateral tomato trade pact.
"I am pleased that we were able to come to an agreement on fresh tomato imports from Mexico that restores stability and confidence to the U.S. tomato market and meets the requirements of U.S. law," U.S. Commerce Under Secretary for International Trade Francisco Sanchez said in a statement.
The draft agreement substantially raises the minimum "reference" price at which Mexican tomatoes can be sold in the United States and accounts for changes that have occurred in the tomato market since the original agreement, Sanchez said.
For some Mexican tomatoes, the new reference price is more than double the current such price, Sanchez said. The deal is expected to take effect on March 4, after a public comment period, he said.
The U.S. Commerce Department made a preliminary decision in September to terminate the 1996 tomato agreement after Florida growers complained the arrangement no longer protected them against Mexican tomatoes sold below the cost of production.
That angered Mexican growers, who argued the pact had benefited U.S. consumers and brought stability to the North American market.
Mexican officials said the U.S. move appeared motivated to help President Barack Obama carry Florida in his election battle against Republican Mitt Romney. Obama won the state in the November contest.
Mexican growers export about $1.9 billion worth of tomatoes to the United States each year. They say Florida producers have not kept pace with new growing techniques that produce tastier tomatoes and have propelled Mexican sales.
The proposed agreement spares Mexican growers from having to wage a costly legal battle against a new anti-dumping case brought by Florida producers.
It also averts the possibility of a broader trade war. U.S. business groups such as the U.S. Chamber of Commerce feared Mexico could retaliate if the United States slapped hefty duties on Mexican tomatoes.
(Reporting by Doug Palmer; Editing by Peter Cooney)