Exporters weigh impact of recent trade actions


Issue Date: October 23, 2019
By Ching Lee

California farmers and agricultural exporters have largely reacted positively to recent developments in trade, including a limited U.S. bilateral agreement with Japan that reduces tariffs on a number of agricultural products important to the state.

But they acknowledged improved market access in this one region does not necessarily offset the difficulties they've had in another important export market—China—as a trade dispute with the U.S. drags on.

Once implemented, the new U.S.-Japan trade agreement, which President Donald Trump and Japanese Prime Minister Shinzo Abe signed earlier this month, will immediately eliminate tariffs on specialty crops such as almonds, walnuts, blueberries, raspberries, blackberries, kiwifruit, peaches, nectarines, broccoli, celery, cabbage, sweet corn and prunes. Other farm products such as beef, wine, cherries, oranges, apples, cheese and whey, and tomato paste will see tariffs reduced in stages, while commodities such as wheat and barley will receive preferential tariff rates through country-specific quotas.

The agreement does not require congressional approval but will need ratification by Japan's legislature. Both governments expect the agreement to take effect Jan. 1.

"This is generally good news," Dan Sumner, director of the University of California Agricultural Issues Center, said of the new trade deal, adding that it moves the U.S. toward similar market access now granted to the 11 Trans-Pacific Partnership countries and the European Union under its free-trade agreement with Japan.

With sales totaling $1.45 billion in 2017, Japan represents the fourth-largest export market for California agricultural goods. Top California farm exports to Japan that year included almonds, rice, walnuts, beef and hay.

For Stewart and Jasper Orchards, a grower, huller and processor of almonds in Newman, Japan has been "a tremendous market for many years," said Jim Jasper, the company's owner and president. He noted the current Japanese tariff of 2.4% on almonds already is not a major barrier for exporters, and with it going to zero under the new agreement, the price of almonds will be even lower for Japanese buyers.

Clovis-based PR Farms, which grows, packs, processes and ships fruit and nuts, has not done much business with Japan, but company President Pat Ricchiuti said he welcomed news of the agreement. A greater hurdle for exporters, he said, is with Japan's nontariff barriers.

"Japan has a notorious reputation as being very picky," he said. "Anything they can find wrong with something, they'll try to lower the price or divert the product."

Kurt Friedenbach, sales representative for Sierra Valley Almonds in Madera and Firebaugh, characterized the Japanese market as having "very specialized buying needs" that require a "very high-quality almond," because the nut is largely sold for snacking rather than used as an ingredient. Though he described the U.S.-Japan agreement as "real positive," he said he also does not think it will change the overall outlook for businesses affected by China's retaliatory tariffs and ongoing trade war with the U.S.

"The beauty of the Chinese market and why it's so important to us is because they buy everything," he said, whereas Japan tends to be a more limited market because of its strict requirements.

Shipments of California blueberries to Japan—valued at $2.3 million in 2017—may be small compared to more-established farm exports such as almonds and walnuts, but Todd Sanders, executive director of the California Blueberry Commission, said the island nation still represents "a super important and high-value market" for California growers. A specialty crop block grant allowed the commission to promote California blueberries in Japan last year, which increased movement of the product by 200%, he said. Cutting tariffs will allow California growers to compete more fairly, he said, adding that competitors such as Chile and Canada already enjoy zero tariffs.

"(Japanese) importers are all clamoring, saying they want California blueberries," he said.

Stuart Woolf, president and CEO of Woolf Enterprises in Fresno, which produces tree nuts and processing tomatoes, said he welcomes any trade agreement "that starts creating greater opportunity" for California agricultural products.

For his company though, Woolf said he's looking to diversify more into specialty, value-added products such as paste, powder and oil in the domestic market.

"I don't know that we're necessarily going down that path because we're concerned about trade," he said. "But those trade issues certainly support our strategy to do more business domestically."

With tariffs removed, Michelle Connelly, executive director and CEO of the California Walnut Board and Commission, said she anticipates further export growth in Japan for California walnuts, "putting us in line with other producers." But ongoing retaliatory tariffs in China and India "remain a challenge for our industry," she added, as losses in those markets "continue to mount."

"However, the fact that we have reached a deal (with Japan), as we have with (the U.S.-Mexico-Canada trade agreement) is incredibly powerful in demonstrating that the U.S. can negotiate and be a good partner," Connolly said.

Also under the deal, current Japanese tariffs of 32% on U.S. oranges will be phased out in five or seven years, depending on the shipping season. Casey Creamer, president of California Citrus Mutual, said this tariff-reduction schedule puts California growers "on a parallel track" with competing countries in the TPP.

Though the agreement will drop duties ranging from 6% to 46.8% on a wide range of canned fruit, Rich Hudgins, president and CEO of the California Canning Peach Association, said it "won't make a difference" in the state's ability to ship canned peaches to Japan, as it still won't be able to compete on price with China.

A bigger victory for California cling-peach growers, he said, is the recent ruling by the World Trade Organization that allowed the U.S. to start imposing tariffs last week on $7.5 billion worth of European imports, including agricultural products such as canned peaches, raw table olives, wine and cheese, as retaliation for European Union subsidies of the aerospace company Airbus.

(Ching Lee is an assistant editor of Ag Alert. She may be contacted at clee@cfbf.com.)

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.