While California walnut producers appear confident a potential marginal drop in harvest production this year compared to 2018 can be overcome by the quality and color of walnuts, many are hopeful that trade negotiations with China may bring additional relief soon as concerns over imposing tariffs linger.
“We’re hoping some of the recent discussions that have been happening (with China) will result in some favorable things…(but) we really don’t know what that phase one deal looks like yet,” said Michelle Connelly, California Walnut Board (CWB) Executive Director and Chief Executive Officer of the California Walnut Commission (CWC).
Of equal concern, however, are harsh tariffs imposed by India. Connelly said California growers are hopeful that U.S. trade officials and India will soon be able to strike a trade deal that will reduce the retaliatory tariffs imposed by New Delhi.
“We’re working with all of our trade partners (in India) as well as through our channels diplomatically with United States Trade Representative and USDA Foreign Agriculture Service offices that are over there to keep the pressure on the situation,” Connelly recently told Western Farm Press.
Connelly, who is credited with first establishing a market in India for U.S. walnuts, said the market “has really taken off” over the last six years since efforts began.
“India, which produces walnuts domestically, has traditionally been an exporter of the nuts they produce, exporting about 50-percent of their total production to the world market,” she said. “But we saw an opportunity because there is actually a big domestic market for walnuts that has been growing rapidly.”
But earlier this year President Trump terminated India’s designation as a beneficiary developing country under the U.S. Generalized System of Preferences program. India, which has been the single largest beneficiary of GSP, lost that designation, which allowed $5.7 billion of duty-free goods to be shipped from India to the United States in 2017 alone.
In response, India imposed tariffs on U.S. goods, including walnuts, which currently amount to 120-percent of value for in-shell walnuts.
“We’re not on even footing with other producers (internationally) which is a challenge, so we’re hoping and working toward a quick resolution to reducing tariffs to the Indian market,” she said.
Hope for progress
Connelly said there was some hope progress on trade issues might advance when India Prime Minister Narendra Modi met with President Trump in the White House in September, but so far there has been no announcement of an agreement that meets the needs of both sides.
On the brighter side of trade, Connelly said the news that Japan was lowering tariffs and trade barriers as part of a new U.S.-Japan agreement and this offers some good news for California growers.
“I think the market momentum is certainly riding the wave of positive signs we are seeing,” she said. “While not everything is positive on that front, I think that helps with the psychology of the market.”
She points to other developments this year including a USDA purchase of walnuts, which she said is also helpful.
Connelly said she doesn’t expect trade negotiations will ever result in Indian tariffs being dropped entirely but said before trade issues developed earlier this year tariffs imposed by India lingered just below 31 percent.
“We had lobbied that rate should be reduced since India doesn’t meet their own domestic demand. But even at 31-percent, U.S. growers can still do much better than they can with the elevated tariffs rate in effect now.”
She said the CWB and CWC have been promoting the health benefits of walnuts to Indian consumers with good success and attributes the growing Indian market in part to those efforts. She also notes it is mostly a vegetarian culture and walnuts offer many advantages to balance vegetarian diets.
Once trade issues improve, she says she expects the market will continue to grow in India as well as other developing markets worldwide.
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