On a 1990s afternoon, Ed Pariseau and I sat next to a stagnant fountain in an abandoned courtyard of a U.S. government building in Mexico City.
I’d left the Northwest Horticultural Council a few years before to found Bryant Christie Inc., a firm that helps exporters eliminate trade barriers, but as I had during the seven years I worked at the Hort Council (1985-92), I was still helping the Northwest apple industry open new markets.
Ed was a principal at Brewster Heights Packing and one of the drivers behind Northwest Fruit Exporters. He was the kind of guy who’d jump on an airplane, fly to a foreign capital to help the industry and never turn in his expenses.
He’d joined me in Mexico where I was working to keep the apple market open and, if possible, expand it.
Unfortunately, that day’s apple negotiations hadn’t gone well. New quarantine requirements harassed on one front while anti-dumping duties threatened from another. We’d beaten back a few threats, but I’d had higher expectations and Ed knew it.
“Bill, you moved the ball forward. Just keep doing that and we’ll get there,” he counseled.
He was right.
A few years later, next to a drained motel pool in Honolulu, a different negotiator and I reviewed a disappointing day of talks over opening China’s apple market.
“Bill,” the U.S. negotiator said, putting the day in perspective, “yeah, we didn’t outline a deal, but we got rid of some obstacles. We’ll get there.”
He was right.
The openings of the Mexican and Chinese apple markets resulted from many people over many years putting agreements together, improving them, while fighting off attacks and threats.
Today, China buys about 1.3 million boxes; Mexico about 10 million. Exports to these two countries accounted for 10 percent of the 2016-2017 Washington apple crop.
But, looking ahead to 2018, the president’s threats to slap new tariffs on Chinese goods and to rip up the North American Free Trade Agreement, could jeopardize exports.
Take tariffs for example. Before NAFTA, the U.S. was largely prohibited from exporting apples to Mexico, and even if you could get a license the duty was over 20 percent. The Northwest apple industry wanted that changed.
That’s why I eagerly accepted an invitation from one of Mexico’s chief negotiators to meet him at San Diego’s Torrey Pines Resort. Walking alongside the golf course, we talked about how the opening of Mexico’s apple market was still unresolved in the NAFTA negotiations and how it was a heavy lift for Mexico.
I made it clear we wanted apple access in the agreement. He understood. He also knew the Northwest apple industry was respected by members of Congress. Mexico wanted help convincing the U.S. Congress to pass the agreement.
As we talked, I came to understand Mexico was more likely to fully open its market to U.S. apples if the Northwest apple industry encouraged Congress to approve NAFTA.
A few weeks later, I testified before Congress about the opportunities NAFTA presented Northwest apple growers. NAFTA not only opened Mexico’s apple market, but eliminated the tariff.
If the U.S. rips up NAFTA, Mexico could raise the tariff on U.S. apples to 20 percent. That would put our apples at a price disadvantage compared with Chilean and Canadian apples, which would retain a zero tariff.
Anti-dumping and countervailing duties also loom as a possible threat. This year, the U.S. is pursuing 61 percent more anti-dumping and countervailing duty cases against foreign exporters than it did in 2016. The U.S. is currently considering duties from 17 percent to 350 percent on certain Chinese products.
China’s current tariff on U.S. apples is 10 percent. Because Chile and New Zealand have trade agreements with China, the Chinese tariff on their apples is zero.
Australian apples enter China with only a 4 percent duty. Marketers predict a growing Chinese appetite for U.S. apples, but a U.S.-Sino tariff war that puts U.S. growers at even more of a disadvantage with Southern Hemisphere suppliers could threaten our market share.
Unquestionably, the U.S. must defend itself when foreign exporters dump product or receive illegal subsidies, but the U.S. needs to ensure what should be economic assessments don’t devolve into political disputes. Often, political trade disputes involve retaliation and collateral damage.
Manipulated standards could be a concern. Anyone who’s had a load kicked-over because of a chemical residue knows the importance of technical standards.
Since the passage of the World Trade Organization Agreement, countries are supposed to base their technical standards on science.
Back when walls were coming down, countries began sharing chemical health risk studies hoping that by using the same studies, standards would emerge similar enough to avoid trade problems.
If countries use different studies and apply different acceptable risk levels, they can end up with different standards. Different standards can complicate trade. That’s happening.
Over the coming year, apple exporters should watch whether the WTO strengthens science-based requirements. If it doesn’t, trade barriers could increasingly masquerade as standards.
Defense, data and offense are what’s needed this year.
Defense: The apple industry must preserve the market access it fought over decades to secure. Whether in China, Mexico or other markets, U.S. negotiators and congressional representatives need to understand how important these markets are to the financial well-being of apple growers, and be ready to defend them.
Data: In a structured negotiating environment, exporters often have a few weeks to assemble information involved in a trade dispute. In this Wild West of shifting priorities, erratic rhetoric and possible retaliation, don’t count on it. Exporters need to be prepared to quickly respond to allegations ranging from predatory pricing to chemical applications. Quickly accessible records can build a needed defense, and offense.
Offense: Uncertainties can generate opportunities. At some point this year, the Chinese might, in order to blunt U.S. restrictions, look for ways to increase their imports or to be seen reducing trade barriers. Having a documented proposal of what you want ready, could be the difference between suffering and celebrating. Similarly, if NAFTA gets shakier, Mexico is going to need allies in the U.S. Congress, and that means allies in the U.S. industry. Reaching out to Mexico might present some opportunities.
When I started working with the apple industry in 1985, Washington exported about 5 million boxes of apples. The industry didn’t get to 33 million exported boxes by negotiating huge, pivotal agreements. Instead, it secured marginal gains, protected them and built upon them.
In the year ahead, that approach will be critical. •
– by Bill Bryant, who was vice president of the Northwest Horticultural Council from 1985-92. Since then he has been chairman of Bryant Christie Inc. (www.bryantchristie.com). In 2016, Bryant was Republican candidate for governor in Washington.