By ANTHONY DePALMA with SIMON ROMERO
If the universe holds a more ideal place for growing oranges than Matao, it has yet to be discovered. The mix of sun, soil and revitalizing rain in this section of southeastern Brazil so perfectly suits citrus that the trees planted in vast plantations across rolling red hills almost bow to the ground with oranges waiting to be picked.
Nobody grows or squeezes more oranges than Brazil, where orange trees now outnumber people and 400,000 workers rely on oranges for their livelihoods.
Since most of the 170 million people in Brazil are not in the habit of drinking orange juice, all but 1 percent of the juice is exported. Much goes to the United States, where Americans are the globe's biggest consumers of orange juice, drinking 68 million glasses every day.
In a world of open borders, this pairing of abundant supply and growing demand should come close to free-trade nirvana. But Washington has imposed heavy tariffs on orange juice from Brazil since 1987. And Clinton administration officials, otherwise considered free traders, are currently conducting a review to determine whether to extend tariffs when they expire next month.
America's reaction to Brazil's prodigious output has become a sore spot in hemispheric relations, an unexpectedly emotional issue that has stymied trade negotiators, riled American citrus growers and infuriated every Brazilian who has anything to do with oranges.
"When we sit down at the negotiating table with American trade representatives they treat it as a joke and say, 'We have orange juice here for you today,' " said Regis Arslanian, head of trade policy for Brazil's embassy in Washington. "It has become such an emotional issue for us because we really think these tariffs are absurd."
Brazilians point out the inconsistencies in American tariffs and charge that the levies on juice are protectionist, plain and simple, just like similar duties imposed on rolled steel, shoes and other goods from Brazil. While 92 percent of American tariffs fall below 10 percent, those on juice from Brazil range as high as 63 percent, which adds about 30 cents to the price of a gallon of juice in American supermarkets.
Growers in Florida -- the heart of America's citrus industry -- say the tariffs are needed because Brazilian growers do not have to meet health and safety standards as demanding as those in the United States, which makes juice production cheaper there. Some American growers also say Brazil subsidizes growers, and claim that some Brazilian growers employ children in the groves.
The child labor charges rankle in Brazil, especially since President Clinton lumped Brazil in with Pakistan and Guatemala when he criticized the use of child labor in a December speech. Brazilian officials refuted the president's claim, which referred to the shoe industry. And Brazilian juice exporters say children do not work in the groves.
Orange juice tariffs are also complicating United States efforts to negotiate a Free Trade Agreement of the Americas (F.T.A.A.) by the year 2005. Not surprisingly, given the controversy over orange juice, Brazil's current priority is reviving the Mercosur trade pact with Argentina and other South American countries, not entering a sweeping new agreement with the United States.
"We are not terribly anxious to negotiate a F.T.A.A.," said Rubens Antonio Barbosa, Brazil's ambassador to Washington. "We have taken part in all working groups, but this doesn't mean that we are willing to accept everything that the Americans put forward."
American trade officials said orange juice tariffs would not be lowered or eliminated unless a broad trade agreement was reached with Brazil. That happened with Mexico after implementation of the North American Free Trade Agreement.
"We attach a great importance to our large and growing relationship with Brazil," said Regina K. Vargo, a deputy assistant secretary in the Department of Commerce. "But we could find our way over some of these longstanding difficulties if we could be engaging a little sooner in talks for the Free Trade Agreement of the Americas."
A decision on extending the orange tariffs another year is scheduled to be made next month. No one expects them to end, but in what could be a sign of weakening government support, two members of the International Trade Commission issued a dissenting opinion in a recent review of the policy, arguing that American orange growers no longer need to be protected.
But American growers say the tariffs are all that saves them from absolute ruin. They claim that the large shipments from Brazil have forced down prices for fresh oranges to less than half what they were a decade ago. "Eliminating the special tariff would be akin to suicide for our industry," said Andrew W. LaVigne, chief executive officer of the Florida Citrus Mutual, a cooperative representing 11,500 citrus growers in Florida, where most domestic juice is produced. "That would literally put our guys out of business."
It was American growers and processors, often working together in cooperatives, who got Brazil into the orange juice business about 40 years ago. After one of the freezes that regularly devastate Florida's citrus crop, the Americans encouraged Brazilian farmers to convert coffee plantations to orange groves. The Americans thought the newly planted groves in the state of Sao Paulo would give them insurance against future freezes.
The Brazilian groves were so spectacularly successful that by the early 1980's they were outproducing Florida's own groves. California and Texas also grow oranges, but the varieties there are more suited to eating than squeezing into juice. Most of the Brazilian juice is boiled and turned into a highly concentrated liquid that can be frozen into a concentrated slush, which is later blended with water and sold as 100 percent orange juice from concentrate.
By 1985, Brazilian concentrate made up 45 percent of the American market, with no limit in sight.
Florida growers fought to limit the inroads of Brazilian juice producers. Through heavy advertising and marketing, Florida growers linked orange juice and Florida in the minds of American consumers.
Some American producers also developed a higher-priced category of juice called not-from-concentrate, which is heated only enough for pasteurization and never has the water boiled out of it. The high cost and logistical challenges of transporting fresh orange juice 4,000 miles from Brazil to the United States have kept Brazil out of the premium market.
Florida growers also filed formal complaints against Brazil with the International Trade Commission in the mid-1980's. The commission determined that Brazilians were selling juice in the United States for less than they did in Brazil, or dumping frozen concentrate in the United States. The first antidumping order was issued in 1987, and they have continued ever since.
The tariffs on imported juice helped American growers regain some lost market share. In 1998, local production accounted for 64 percent of the domestic market of orange juice concentrate, while Brazilian supplies accounted for just 12 percent.
Despite the barriers to entering the United States market, Brazilian growers have continued planting trees and redoubled efforts to export more juice to Europe.
In addition, some big Brazilian companies have purchased processing plants in Florida. These companies now control enough of the processing industry in Florida to influence prices for bulk juice from concentrate, which they buy from growers in either Florida or Brazil. Often, the effect is to lower prices paid for concentrate from Florida.
"The gains from going transnational are many," said Ademerval Garcia, president of Abecitrus, a trade organization representing Brazil's major orange juice exporters.
But moving into a competitor's market can backfire. Early this year workers at a plant in Auburndale, Fla., which had been purchased by a Brazilian company, went on strike for six weeks to protest unfair labor practices. The plant had been owned and operated by Minute Maid, a division of Coca-Cola, until it was sold to Cutrale Citrus in 1996. Cutrale is one of the largest orange juice producers in Brazil and a longtime supplier to Minute Maid.
"For 30 years prior to the sale to Cutrale, that plant had no strikes, no complaints, no accidents in which any workers were killed," said Carin R. Zelenko, assistant director of the office of corporate and strategic initiatives at the International Brotherhood of Teamsters, which has represented plant workers for 30 years.
Since the plant was sold, one worker has been killed in an accident and Cutrale's efforts to increase production have led to deteriorating health and safety conditions and a failed state food safety inspection, Ms. Zelenko said.
Hugh W. Thompson, president of Cutrale Citrus Juices U.S.A., said the charges were unfounded. He accused the union of spreading false information to strengthen its negotiating position for coming contract negotiations. "We have spent more than $30 million on these plants in the last few years and we will spend another $35 to $40 million over the next three to five years," Mr. Thompson said. "Conditions are better now than when we bought these plants."
Besides Cutrale, the other Brazilian company to enter the United States market was Citrosuco Paulista, which acquired a plant in Lake Wales, Fla., in 1997.
Adding to the tension between Brazil and the United States is the entrance into the Florida market of two other big companies. Louis Dreyfus, a French commodities company, recently purchased a processing plant in Winter Garden. And Cargill Inc., the large American commodities company that processes oranges in Brazil, has taken over plants in Frostproof and La Belle.
Along with the big Brazilian processors operating in both Florida and Brazil, these companies can regulate how much juice they take from each country depending on whose prices are lower, said Philip F. Lesser, director of economic and market research for the Florida Department of Citrus.
Together, the four big concerns have enough capacity to process about 30 percent of American orange production. In Brazil, these same four dominate more than 80 percent of the market.
To local growers like Charles F. Roper, whose family owns 1,800 acres of trees in Winter Garden, hemispheric tensions and global politics simply boil down to more difficult days.
"It's sort of been inevitable that competition would come in from somewhere else," he said. "It's part of being in a world market.":
