Promising trade gains, U.S. signs phase one trade agreement with China

The phase one trade agreement signed by the U.S. and China Jan. 15 will deliver potential trade gains for U.S. growers of potatoes, blueberries, avocados, and other crops.

However, the deal does not immediately address existing punitive retaliatory tariffs imposed by China on U.S. fruits and vegetables.

Industry leaders welcomed the news but acknowledged more progress is needed to restore trade with China. U.S. Department of Agriculture trade statistics indicate U.S. fruit exports to China of $120 million in 2019 were nearly 50% less than 2017.

Ryan Talley, Western Growers board chairman and partner at Talley Farms, was at the White House for the signing of the phase one trade agreement.

“On the heels of other recent trade gains with Japan, Mexico, and Canada, the phase one agreement represents constructive progress in the effort to rebalance our nation’s trade relationship with China,” Talley said in the statement.

While American growers have suffered double-digit declines in exports to China because of retaliatory tariffs, Talley said Western Growers is optimistic the industry will eventually see expanded access to the Chinese market.

Jim Bair, U.S. Apple Association president and CEO, also attended the signing ceremony.

“We congratulate the administration for negotiating and concluding this important agreement and look forward with expectation that China’s retaliatory tariffs on our apples will be removed,” Bair said in a statement. “China doesn’t grow the new and exciting varieties we do, and we know their consumers want them, so we’re ready to roll.”

Randy Giumarra, California Fresh Fruit Association chairman and vice president of sales at Giumarra Vineyards, also attended the ceremony. While the new agreement doesn’t drop tariffs, it’s a step in regaining lost markets, Giumarra said in a statement.

“It is a promising first step which we are confident will result in lower tariffs and increased grape and stone fruit sales to this valuable market,” Giumarra said in the statement.

According to the California association, grape exports to China dropped 83% in 2019, compared to the previous year.

Details

As part of the agreement, China has agreed to purchase between $40 and $50 billion in American agricultural goods each year for two years.

According to the U.S. Trade Representative website, U.S growers will benefit from new opportunities to “export multiple products, such as fresh potatoes, California nectarines, blueberries, and California hass avocados” to China.

China has agreed to sign and implement phytosanitary protocols with the U.S. to allow imports of:

California nectarines;
Blueberries;
California hass avocados and
Fresh potatoes for processing.

The U.S. has agreed to complete plant health regulatory process to import fresh Chinese citrus, jujubes and fragrant pears, according to the U.S. Trade Representative. The U.S. and China have agreed that phytosanitary certificates are not required to import frozen fruits and vegetables.

Export opportunity

Kam Quarles, CEO of the National Potato Council, weighed in on the development and other trade news Jan. 15 at the 2020 Potato Expo in Las Vegas.

“When you look at just the last very few weeks, it looks like we’re going to get USMCA (passed by the Senate Jan. 16), we got the China signing today, and we have had the Japan trade agreement ratification,” he said. “There is little more optimism that the trade (issues) are going to start to settle down.”

John Toaspern, chief marketing officer of Potatoes USA, said the potato industry, including the efforts of the National Potato Council, state organizations and Potatoes USA, has been seeking China access for fresh potatoes for processing for about 20 years.

“We have gone through ups and downs and there were points where we thought we were getting close and then we would fall off.” he said. “We have been working on this for a long, long time.”

Matt Lantz, vice president of global access for Bryant Christie Inc., has worked for many years with the industry in negotiations to open the Chinese market. Lantz said the phase one agreement calls for plant health officials in the U.S. and China to sign and implement phytosanitary protocol for the importation of U.S. fresh potatoes for processing into China within seven working days of when the agreement goes into force. The phase one agreement will be implemented Feb. 14, and final details should be wrapped up by Feb. 25, Lantz said.

“We need a market access protocol, and it has to include provisions that we can meet,” he said, noting there are a handful of issues that need to be resolved from a draft agreement on potato access reached last February.

“We hopefully will finish all this up, and we’ll be able to make an announcement on February 25,” he said.

Toaspern said the China market represents big potential.

“The snack food industry in China has been growing exponentially, and they are in a level of economic development that lends itself to lots of increase in disposable income around snacking,” he said.

While China grows potatoes, it doesn’t have a year-round supply, closing plants for four or five months at the end of the season..

“What we’ll be able to do is meet the unmet demand there right when they start to run out,” he said.

Toaspern said it is not certain when China’s 10% retaliatory tariff on U.S. frozen potatoes and a 20% to 30% increase on U.S. dehydrated potatoes will end.

“The fact that the European Union had lower supplies this last year helped mitigate that a little bit, or I think we would have seen greater sales losses,” Toaspern said. “Unfortunately, this phase one agreement does not eliminate those tariffs.”

Quarles said the longer-term hope is that the phase one agreement is one step toward the removal of the retaliatory tariffs. “The assumption is that since hopefully cooler heads are prevailing, it allows both sides to save face and eventually back away from these tariffs.”

Broader deal

According to the White House, provisions in the broader 96-page agreement:

Address structural barriers that have unfairly limited U.S. food and agricultural exports;
Include significant commitments by China on accepting U.S. agricultural biotechnology products;
End China's practice of forcing foreign companies to transfer technology to Chinese companies to gain market access;
Address numerous intellectual property concerns on trade secrets, trademarks, and pirated and counterfeit goods;
Include commitments on China's currency practices on devaluations and exchange rates; and
Address trade and investment barriers to American financial services companies competing in China.

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