Uncertainty may be the best word to describe the economic outlook for the fruit industry when it comes to trade in 2017.
The United States is the top global agricultural exporter, yet for industry groups that lobby on behalf of fruit growers, the focus heading into the new year will be understanding the positions and sought-after policies of President-elect Donald Trump.
Generally, most of the tree fruit industry supports free trade.
Trade was one of the cornerstones of Trump’s candidacy, and his campaign rhetoric in support of more protectionist trade policies run counter to the free trade agenda of recent U.S. administrations.
President Barack Obama had negotiated the proposed Trans-Pacific Partnership with 11 Pacific Rim partners, who together with the U.S. represent 40 percent of the global economy.
Under the deal, tariffs on U.S. apples, pears and cherries would have been gradually phased out in Japan, Malaysia and Vietnam; tariffs in the eight other countries are already at zero. TPP effectively died in Congress last November, following Donald Trump’s election as president.
The White House has broad powers over trade policy, and while the Trump administration won’t be able to act unilaterally, the president-elect has repeatedly pointed to an end in U.S. participation in the deal.
Trump has also announced support for renegotiating terms of the North American Free Trade Agreement, or NAFTA.
Canada and Mexico are the largest export markets for U.S. apples and pears — 46 percent of U.S. apple exports and 70 percent of U.S. pear exports go to those two countries — and Canada remains the largest export market for U.S. cherries as well.
“We’d hate to see a repeal of NAFTA if President Trump potentially gets his way. That would be a disaster for our industry,” Washington Apple Commission President Todd Fryhover said.
However, Trump’s policies aren’t the only areas for review in the year ahead. Drilling down into specific crops and markets highlights areas demanding industry attention.
The Asia question
China has proposed setting up its own, rival version of the TPP, and if the U.S. fails to move forward on a trade agreement with those Pacific Rim nations, U.S. influence would be greatly weakened in Asia, said Des O’Rourke, world market analyst and director of Belrose Inc. in Pullman, Washington, publisher of the monthly World Apple Report.
While the U.S. has always stood for free movement of goods, reducing barriers, no protection of state industries, China has the opposite approach, he said. The country has no qualms about playing games with trade, and most Asian countries are terrified to go against China.
“The negotiating power is slipping away from the United States,” O’Rourke said. “Twenty years ago, we were in the driver’s seat in terms of getting free trade agreements that fit our philosophy of how trade ought to operate. For various reasons, that has escaped us.”
That being said, China shows potential for U.S. exports. Apple growers acquired more access recently, and there is tremendous opportunity for some of the newer varieties that are grown in the U.S. with middle and upper middle class consumers in China, Fryhover said. “That’s very exciting.”
China also is about 10 years behind the U.S. in cherry production; its cherries are not well received in southeast Asia, and even within China, the country’s targeted consumers are more lower-class than those for U.S. exports, said Keith Hu, director of international operations for Northwest Cherry Growers.
“At the moment, I feel pretty safe — we’re all right there,” he said. “And southeast Asia is a premium market, with great prices for fruit growers. We really don’t have competition there.”
Then, there’s Russia.
“They’re slapping sanctions on left, right and center without any regard to their obligations on trade agreements,” O’Rourke said, noting how Poland was left scrambling to find new markets for its apple crop after Russia banned imports of fresh fruits and vegetables from the U.S. and European Union. “But cutting Europeans from their market, they have created problems around the world.”
That’s why, perhaps, the industry’s major marketers are focusing on premium varieties — high-value products — that can be sold in the domestic market and Canada, he said.
Other areas of concern
Continued progress in trade talks with Australia and South Korea will be a focus for the Northwest Horticultural Council in 2017.
U.S. apple and pear growers have never had access to Australia, and the industry is working to address plant quarantine concerns to gain it, said Mark Powers, NHC executive vice president. The U.S. already has access for cherries.
In South Korea, the council is also working to gain access for apples and pears and to negotiate a systems approach for cherries to eliminate a requirement that the U.S. growers fumigate with methyl bromide.
The latter effort also is underway in India. “The model was first successfully adopted with Japan, and we’re trying to extend that to other countries so we don’t have to rely on methyl bromide as the sole mitigation method for shipping cherries to those countries,” Powers said.
The apple industry also is working to develop a work plan to improve access to Japan for U.S. growers.
If there’s one thing that can be learned from Poland when its apple market in Russia closed, it’s the need to ensure that current U.S. markets remain open — thus highlighting a top priority for the Northwest Horticultural Council in 2017.
“We just need to try to maintain our ability to get into those markets without any additional barriers to trade,” Powers said. “That could be pesticide MRLs, food safety concerns, labeling, plant pest and disease concerns — all of those regulatory constraints, barriers, that are currently manageable. As long as there aren’t any changes, it’s really a question of price and quality, and we know our growers can compete.” •
What TPP would have done
The 12 countries comprising the proposed Trans-Pacific Partnership represent 40 percent of the global economy: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam.
Under the deal, Japan’s 8.5 percent tariff on cherries would have been reduced by half, with the remaining tariff eliminated over six years. Its 17 percent apple tariff would have been cut by 25 percent immediately and the remainder eliminated in 11 years. On pears, its 4.8 percent tariff would have been eliminated immediately.
Malaysia’s 5 percent tariff on apples, pears and cherries would have been eliminated immediately, and Vietnam’s 10 percent tariff on tree fruit products would have been phased out over three years.
Tariffs in the eight other countries are already at zero.
– by Shannon Dininny