Farm groups foresee benefits from trade pacts

Issue Date: January 22, 2020
By Ching Lee

Senate passage of an updated trade agreement among the U.S., Mexico and Canada and signing of a U.S.-China Phase 1 deal have farm groups celebrating a breakthrough in U.S. trade relations, with hopes of increased purchases of American farm products.

By a vote of 89-10, the Senate approved the United States-Mexico-Canada Agreement last week. The House of Representatives approved the deal last month to replace the North American Free Trade Agreement. The USMCA now heads to President Trump to be signed.

Mexico ratified the pact in December, and Canada is expected to vote on it in the coming weeks.

California Farm Bureau Federation President Jamie Johansson said passage of the USMCA has been a top priority for the organization, adding that the deal "will further open markets for California-grown food and agricultural products, and will benefit the tens of thousands of Californians whose jobs rely on farm exports to Canada and Mexico."

Johansson also welcomed the Phase 1 agreement between the U.S. and China.

"We're hopeful the Phase 1 agreement will ultimately lead to further easing of trade tensions between the two nations, and that the United States will continue to pursue trade policies that open markets for high-quality California farm products," he said.

The U.S. and China agreement, set to take effect Feb. 14, includes a pledge by China to buy at least $40 billion of U.S. food and agricultural products annually, and to address structural and technical barriers that impede trade.

The 86-page agreement pauses a nearly two-year trade dispute that has slowed U.S. agricultural exports to China, which imposed retaliatory tariffs on nearly all farm imports from the U.S., including California farm products such as fruit, nuts and wine. Those tariffs remain in place. In exchange for China signing the deal, the U.S. cut in half existing 15% tariffs on $120 billion of Chinese goods and held off on other planned tariffs.

In addition to commitments to increase purchases of U.S. farm products, China has agreed to improve sanitary and phytosanitary measures, and to finalize phytosanitary protocols for California Hass avocados and U.S. blueberries, nectarines, potatoes, alfalfa and timothy hay, barley and almond meal. The deal also addresses other nontariff barriers to U.S. agricultural goods, including for rice, horticultural products, dairy, meat, poultry, animal feed and biotech farm products.

Though some analysts have expressed doubt China will be able to purchase as much agricultural goods as U.S. trade officials have projected, particularly with retaliatory tariffs still in place, Veronica Nigh, an economist with the American Farm Bureau Federation, said the potential to achieve the $40 billion target "seems obtainable," considering the comprehensive definition of agriculture used in the agreement.

For example, agriculture-related products such as distilled spirits, ethanol, biodiesel, forest products and fish products are included, as are pet food, infant formula and dietary supplements.

The agreement gives China flexibility in how to reach import goals, Nigh said, adding that U.S. exporters will still have to win market share away from competitors, "and the product mix may be different from what the U.S. has exported in the past."

Joel Karlin, a market analyst for Western Milling in Goshen, noted the Chinese have said they will buy U.S. farm goods based on market conditions.

"Some feel China will drag its feet on additional purchases until all the tariffs levied on them are removed," Karlin said.

Dan Sumner, an agricultural economist with the University of California, said he does not see the agreement eliminating "high trade barriers to let markets work," because it retains tariffs on U.S. goods.

With China agreeing to implement a phytosanitary protocol to allow imports of California Hass avocados within three months of the deal's effective date, Ken Melban, vice president of industry affairs for the California Avocado Commission, said he is "very hopeful we can start shipping this season," which ramps up in late February and runs into September.

The commission has been trying since 2005 to gain market access to China for California avocados, he said. It sent a draft phytosanitary protocol to China last year and worked with the U.S. Department of Agriculture to be part of the Phase 1 agreement.

California already exports avocados to Hong Kong—some $2.3 million worth in 2017—but Melban said consumption in mainland China remains "relatively small" compared to other countries. Nations that do ship avocados to China, such as Peru, Mexico and Chile, have seen "tremendous growth," he said.

"I know there's tremendous interest in China in California avocados, so we're very excited about the possibility of exploring that market," he said. "We've got a prime opportunity now to hit the ground running if we can get this deal finalized and get the protocol set."

With California blueberry production increasing, Todd Sanders, executive director of the California Blueberry Commission, stressed the importance of finding additional export markets "to alleviate some of the pressure on the domestic market," and said having market access to China "would certainly be beneficial."

He called the Phase 1 deal "a pretty significant development" for blueberries, noting the Chinese market is a high priority for the commission, which has been "actively attempting to obtain market access for years." Under the agreement's timeline, negotiations on a phytosanitary protocol and other market-access issues will probably take place around mid-May, he said, which means California shippers may not be able to benefit from the agreement this year.

Although China opened its market to U.S. rice in 2017, after reaching an agreement on a long-stalled phytosanitary protocol, it did not purchase any U.S. rice until last summer, when Yolo County-based Sun Valley Rice became the first American company to make a sale. China has so far approved 32 U.S. facilities to ship rice to its shores.

With China now agreeing to speed the registration process, Jim Morris of the California Rice Commission said, "we are encouraged that there appears to be progress," as the agreement "will hopefully allow for a more transparent and expedited process to add certified export facilities."

(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.




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