When Life Gives You Lemons: The US-Argentina Lemon Trade Dispute

Even if you are someone who appreciates lemon meringue pie, lemonade, and a slice of citrus in their soda, you have probably not given much thought to where your lemons come from. If that is the case, you may be surprised to learn that not only is Argentina one of the world’s leading lemon producers, but that for years an intense conflict has been brewing over the import of Argentine lemons into the United States.

 

You say Limón, I say Lemon

 

Though lemon tree groves are not the typical images stirred by the mention of Argentine agriculture, the Argentine citrus industry is both locally important and globally relevant. During the 2015 agricultural marketing year, Argentina produced 1.56 million metric tons of lemons, according to the Argentine Citrus Federation FEDERCITRUS. In addition, the country produced another 1.62 million metric tons of other citrus fruits, such as grapefruits, oranges, and mandarins.

 

The arid Northwest region of Argentina is particularly suitable for growing citrus and as a result, lemon production is concentrated in the provinces of Tucuman and Salta. In fact, Tucuman alone accounts for almost 80% of Argentine lemon production, with over 38,000 hectares dedicated to the fruit. Other Northern provinces such as Corrientes and Jujuy are major producers of other citrus fruits.

 

Of the 1.56 million metric tons of lemons produced in Argentina in 2015, only 4.5% were consumed domestically, while 156 thousand metric tons (11.9%) were exported as fresh fruit. The vast majority of Argentine lemon production is destined for processing into oils, juices, and other products, many of which are routed to global markets. Exports are critical to the success of the Argentine lemon industry and the product has found particular success in Russia, as well as Europe where the Netherlands, Spain, and Italy each import in excess of 25 thousand metric tons annually. However, one export market that has remained elusive is that of the United States.

 

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At over a million metric tons a year, the United States’ total domestic consumption of lemons is more than 14 times greater than that of Argentina. Given that estimates of domestic production are around 800,000 metric tons, some of which is exported, it is clear that imports are necessary to fill the gap. In fact, according to the USDA, during the 2015/2016 marketing year, the US was the world’s largest importer of lemons and limes, with imports totaling 615,000 metric tons.

 

The Lemon Law

 

Argentine lemons have been fighting to gain access to the US market for decades and for just as long, US producers have been resisting their entry. Those supportive of allowing the import of Argentine lemons include, of course, Argentine lemon producers who stand to gain economically, but also transportation and logistics companies who benefit from expanded trade, as well as retailers who are looking to achieve supply stability. Ultimately, as imports rise and the total supply of lemons grows, prices would be expected to drop, benefitting consumers.

 

On the other side of the fence are domestic lemon producers. Clearly there are economic risks for domestic producers if they are forced to compete with additional imports. However, the argument of those against the import of Argentine lemons into the US has hinged upon sanitary issues and particularly the potential risk of introducing certain citrus diseases into the US that could have a devastating effect on the domestic crop.  

 

To fully understand the tumultuous history of the Argentina/US lemon trade, let’s start at the beginning. For our purposes, the story begins in the early 1990’s when Argentina began to lobby the USDA’s Animal and Plant Health Inspection Service (APHIS) to allow entry of Argentine lemons, among other citrus fruits, into the US. Until that point, Argentine citrus had been blocked from entry into the US due to several pest and phytosanitary concerns.

 

By 1999, APHIS finally granted approval for the import of Argentine lemons and according to data available from the FAO, Argentina exported 7,314 metric tons and 17,552 metric tons of lemons and limes to the US in 2000 and 2001, respectively. However, the arrangement was not to stand. According to Choices magazine, in March of 2001, domestic citrus growers filed a lawsuit against the USDA, and ultimately the ruling granting access to the US market was overturned, effectively halting the importation of Argentine lemons into the US.

 

In 2005, the proponents of the lemon trade once again took up efforts to access the US market, but with little success. The Argentine lemon industry grew so frustrated with their inability to make progress that on September 3, 2012, they formally requested assistance from the World Trade Organization (WTO) to settle the dispute.

 

During the Obama administration, APHIS revisited the lemon issue by performing additional research and executing site visits to better understand the sanitary risks associated with importing Argentine lemons. USDA research associated with the final rule indicated that projected imports of lemons would total 18,000 metric tons and result in a net welfare gain of $2.5 million USD ($19.9 million USD in producer losses being offset by $22.4 million USD in consumer welfare gains). On December 20, 2016, APHIS published their final rule allowing for the import of lemons from northwest Argentina and it seemed that the US market would finally be open to Argentine lemons.

 

A Bitter Taste

 

Although the Argentina lemon growers were celebrating in late December, the rule would not go into effect for 30 days. On January 20, 2017 President Trump took office and just days before Argentine lemons would have been allowed into the US, a 60 day stay was placed on all approved but not yet implemented rules, including the lemon rule. In late March, this stay was extended for an additional 60 days.

 

Even though stays such as this are common with changes of administration, the risks for the potential import of Argentine lemons in this case are clear. Given the Trump administration’s preference for protectionist policies, their review of the rule could result in a much different outlook for the future of Argentine lemons in the US.

 

For now, stakeholders on both sides of the debate will wait with bated breath for additional indications from the Department of Agriculture. The case of Argentine lemons in the US is just one more example of the tremendous complexity of agricultural trade and its important implications, not just for producers and consumers, but for everyone across the agricultural value chain.