By Ching Lee
With the pandemic continuing to test supply chains, attention to ongoing trade conflicts may have taken a back seat. But tariffs affecting key California agricultural exports remain.
As a result of a U.S.-China trade dispute triggered in 2018, Chinese retaliatory tariffs continue to impact a broad range of California agricultural exports. For example, exports of tree nuts and wine still face increased duties. This is despite implementation in 2020 of the Phase One U.S.-China trade agreement.
Todd Meyer, sales and marketing specialist for Bear Republic Nut Co. in Chico, which markets almonds and walnuts, said concerns about the Chinese tariffs became less urgent last year because larger state crops for both nuts dropped prices “dramatically.” The lower prices allowed Chinese importers to buy more nuts, even with the tariffs, he said.
With anticipation of reduced crops for both almonds and walnuts this year, Meyer said importers may pull back as prices increase.
“There might be more limited buying taking place going forward,” he said.
A bigger concern, Meyer said, is ongoing shipping delays related to congestion at U.S. seaports. The problem, which began last year, have weighed on agricultural trade, exporters say, as they contend with repeated canceled bookings, lack of equipment, trucking issues and narrow windows to get products to ports.
“I haven’t seen it this bad ever,” Meyer said. “It’s been very, very frustrating.”
The Ocean Shipping Reform Act, introduced last week, would provide new authority to the Federal Maritime Commission to address unjust practices by ocean carriers and marine terminal operators. The California Farm Bureau and the American Farm Bureau Federation both support the legislation.
With nearly every one of his wine shipments being delayed by up to six to eight weeks, Joe Lange, international sales director for LangeTwins Family Winery and Vineyards in San Joaquin County, said he’s working with importers to forecast inventory to better accommodate the longer waits and to “get wine on the water faster.”
Port delays and supply chain disruptions have also affected incoming shipments of dry goods such as corks and glass that the winery needs to produce wine, he said.
U.S.-China trade tensions intensified after the Trump administration in 2018 imposed new tariffs on steel and aluminum imports from nearly every country in the world. Top trading partners including China, Canada, Mexico and the European Union, retaliated with their own tariffs.
The U.S. in 2019 reached an agreement with Canada and Mexico to end the dispute and remove their respective tariffs, paving the way for approval of the U.S-Mexico-Canada Agreement, or USMCA. It updates the North American Free Trade Agreement. But U.S. trade frictions continued with China, with more tit-for-tat duties imposed by both countries.
Chinese retaliatory actions included imposing tariffs on wine.
Still today, Lange said he’s working to absorb some of the costs through a federal export promotion program administered by the Wine Institute. The cost-share program allows Chinese importers to be partially reimbursed to offset the higher required tariffs so that “we can continue to do business,” he said.
Honore Comfort, vice president of international marketing for the institute, said the 25% reduction offered to importers has had a positive effect in offsetting the tariffs.
“As a result, we have been seeing strong growth this year so far in China for California wines,” she added.
U.S. wines exports, with more than 95% from California, increased more than 18% in value through June over the same period last year, according to the Trade Data Monitor. Shipments to Canada, the largest market for U.S. wine exports, gained more than 22% in value compared to the same period in 2020. South Korea also has seen growth this year and is now the fifth-largest market for U.S. wine exports, Comfort said. In addition, wine exports to China and Hong Kong through June jumped by 132% and 52%, respectively.
Meanwhile, the U.S. and the European Union reached an interim agreement in June to suspend tariffs for five years as they work to resolve their 17-year dispute over aircraft subsidies to Boeing and Airbus. Agriculture became entangled in the dispute after the U.S. in 2019 won an arbitration award from the World Trade Organization, which authorized the U.S. to begin imposing tariffs on EU imports.
Farm groups such as the Olive Growers Council of California, California Canning Peach Association, California Citrus Mutual and the National Milk Producers Federation praised the new U.S. tariffs on European food and farm products such as wine, cheese, raw table olives, olive oil, preserved peaches and citrus fruit.
Todd Sanders, executive director of the Olive Growers Council of California, said growers were disappointed to see the tariffs on bulk raw olives lifted, though it was expected that the Boeing-Airbus dispute would eventually be resolved.
“We were hoping (the tariffs) would last a little bit longer,” he said, to allow California table olive farmers to convert their current acreage to more modern plantings suitable for mechanical harvesting. This would allow them to better compete with EU growers, who are “heavily subsidized,” he added.
But he said existing anti-dumping and countervailing duties on EU ripe table olives, which the U.S. set in 2018, remain “rock solid” and in place, giving California growers “a fair fight.”
“The countervailing duties was the most important part. That’s the one that saved the industry,” Sanders said.
For U.S. dairy exports, one focus has been enforcement of the trade pact with Mexico and Canada, under which Canada agreed to provide more market access to U.S. dairy products. Late last year, the U.S. challenged Canada’s allocation of dairy tariff-rate quotas, or TRQs, which impose tariffs on imports above certain volumes. The U.S. requested official consultations to resolve the concerns.
The trade agreement allows Canada to maintain TRQs, but U.S. dairy farmers and processors say the North American trading partner continues to circumvent its market access obligations under the agreement. In a letter to the Office of the U.S. Trade Representative earlier this year, dairy and farm groups, including the American Farm Bureau Federation, called attention to Canada’s ongoing violations.
The groups pointed to Canada’s unfair allocation of TRQs to Canadian processors, thereby denying U.S. dairy farmers, processors and exporters “hard-fought benefits of the USMCA.” U.S. trade officials in May formerly requested and established a dispute settlement panel to review Canada’s measures.
(Ching Lee is an assistant editor of Ag Alert. She may be contacted at firstname.lastname@example.org.)
Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.