Retaliatory tariffs on farm goods resulting from U.S. moves to protect its steel and aluminum industries have caused no shortage of angst among West Coast growers and agricultural processors.
But trade experts caution that tariffs aren’t the only obstacles facing American-grown tree nuts and other commodities as they enter key markets overseas in 2019.
Internal politics, food safety and quality regulations, labeling requirements and competition all vary by country, forcing U.S. commodity groups to tailor their efforts in each of the markets that they target, notes Julie Adams, the Almond Board of California’s vice president of global technical, regulatory and government affairs.
“Suffice to say this is a long and winding road we’re on,” Adams told a standing-room-only audience at the recent Almond Conference in Sacramento, Calif. “The broader trade environment is going to influence the outcome of discussions.
“We can’t ignore the political environment,” she adds. “As tensions increase, it becomes harder and harder to resolve issues.”
Adams and others detailed the challenges and opportunities during a series of workshops on international trade at the almond industry’s 46th annual conference, held Dec. 4-6 at the Sacramento Convention Center.
To be certain, policy from President Donald Trump’s administration sets the tone for much of the discussion on trade. For almonds, U.S. duties on foreign steel and aluminum led to what is now a 50 percent tax on nuts sent to China, one of the top destinations for California almonds.
A report in July from the University of California’s Agricultural Issues Center estimated that higher tariffs in important export markets could cost major U.S. fruit and nut industries $2.64 billion per year in exports to countries imposing the higher tariffs, and as much as $3.34 billion by reducing prices in alternative markets. Almonds alone could lose about $1.58 billion, according to the study.
While the tariffs initially disrupted the market, shipments picked up globally last fall, setting records in October, notes Holly King, the Almond Board of California’s chairwoman.
“The world still has a love affair with almonds, and we’re really glad they do,” she says.
Still, potential land mines remain for agricultural trade, including a U.S. effort to undermine the World Trade Organization’s binding dispute settlement process, asserts Craig Thorn, a partner at the Washington, D.C.-based DTB Associates LLP. The firm consults with clients on trade issues.
Starting with then-President Barack Obama and continuing with Trump, the U.S. has blocked appointments to the WTO’s Appellate Body over what it saw as overreaching in some of its rulings, threatening to leave the panel with too few members to function. In that event, WTO decisions would effectively be non-binding, experts say.
The WTO’s dispute process has sometimes served U.S. agriculture well, observes Bruce Hirsh, a former trade litigator and negotiator under Presidents Bill Clinton, George W. Bush and Obama. For instance, a case the U.S. won against Japanese restrictions on apple imports was followed quickly by successful talks to remove similar restrictions on lettuce and tomato exports, Hirsh writes on the TradeVistas blog.
DAMAGE TO AG
Ending or weakening the binding dispute process could be damaging to ag even as it favors more “protectionist” industries like steel, opines Thorn, who represented the U.S. at the WTO on agricultural trade matters in the 1990s.
“There’s been a lot of talk of trade balance in this administration, but I don’t believe in that premise,” Thorn told conference-goers. He adds that trade “isn’t a zero-sum game,” noting that the U.S. has halved its trade deficits with free-trade-agreement partners since 2006 while the trade deficit with the rest of the world has nearly doubled.
While the U.S. has free trade pacts with 20 countries, the European Union has them with 95 countries and has dozens more under negotiation, Thorn says.
“Why should we care what other countries are doing?” he says. “Since the U.S. is moving more slowly, failure to negotiate can put us at a competitive disadvantage.”
For example, opting out of the Trans-Pacific Partnership has put the U.S. at a disadvantage when it comes to beef, pork, wheat, almonds and other commodities for which Japan is a top destination for American goods, he says.
Other barriers vary by country or region, including pesticide restrictions in the European Union, technical issues in India and political issues in India, China and the United Kingdom, the Almond Board’s Adams explains.
In India, almond kernel standards center around a nut’s oil content or whether it is chipped or scratched, not based on food safety, Adams says. The country is working on new nutrition standards, she says. And the policies may change after upcoming elections, she adds.
“Typically in India, barriers come up very quickly and they’re not based on science,” Adams says. “That’s where we have issues. Science can be interpreted in many different ways and it’s not always going to be a compelling case.”
China has a comprehensive food safety law, but it’s applied differently by officials at the provincial level, she says. Meanwhile, the UK is still determining whether it will leave the EU, and bilateral talks with the UK can’t start until after the divorce is completed, she says.
In all of these cases, maintaining lines of communication with officials and industry representatives in destination markets has been a key to success, Adams says. The Almond Board has employees in each of the markets and also works with domestic commodity groups.
The recent decision by the U.S. and China to call a trade truce and resume negotiations “certainly sent a strong message to industries and brought confidence that they’ll be able to reach agreement,” Adams says.