Tag Archives: China

APPLES AND NAFTA

ABOUT THEM APPLES – PART II,
FROM GALA TO GRANNY SMITH

With NAFTA in doubt…

“[T]he health of the U.S. apple industry is hanging on a stem.”
Jim Bair
October 24, 2017 (on-line publication date).

Editor’s note. It has been almost three weeks since we published the last TTALK Quote on October 6. We apologize for the unexplained silence, but the TTALK Quotes aren’t dead. They were just sleeping.

Sauvie Island Apples rkm photo

CONTEXT

Our last entry focused on tomatoes or love apples, and it had been our intention to follow that with a quote about real apples, the kind that give us apple pie, cider, and a nice crunch when you bite into them. And then earlier this week, with an op- ed in The Wall Street Journal, the president of the U.S. Apple Association, Jim Bair, gave us this quote.

To say the least, Mr. Bair profoundly disagrees with President Trump’s assessment of NAFTA – you know, “worst trade deal ever made.” As Mr. Bair put it, “Our growers know it is the best apple trade deal to date.” Here are some of the numbers he provided:

$4 billion – the value of U.S. apple sales “at the farm gate,” i.e., wholesale;

$15 billion in related downstream activity.

We know you are going to read the article, but this paragraph deserves to be quoted here in full:

“Since the agreement took effect, the U.S. apple industry has quadrupled and doubled its exports to Mexico and Canada respectively. These top export markets bring $450 million in additional value to our growers and packers annually. In total, the U.S. apple industry exports a third of the 240 million bushels of apples it harvests each year.”

The Perishable Goods Provision. Mr. Blair kept his argument to the big picture. He talked about NAFTA as a whole and the consequences to his industry if the agreement were to go away, either through a U.S. withdrawal from NAFTA or through some other breakdown.

In our last entry, however, the one on tomatoes, we focused on a specific U.S. negotiating objective, namely this one on trade remedies and perishable goods:

“Seek a separate domestic industry provision for perishable and seasonal products in AD/CVD [antidumping and countervailing duty] proceedings.”

In doing so, we took note of the fact that Florida’s two senators, Senator Bill Nelson, a Democrat, and Senator Marco Rubio, a Republican, had written to Ambassador Lighthizer in support of just such a provision.

But what is good for Florida tomatoes is not so good for Northwest apples. On September 20, 2017, a sizeable subset of the Pacific Northwest delegation wrote to Ambassador Lighthizer urging him NOT to pursue a new provision for perishable and seasonal goods. They wrote:

“Given that there are serious, unresolved stakeholder concerns about the negative impact of such a provision on U.S. exports and jobs, we ask that you not move forward with this proposal.”

Much of the punch of their argument is contained in these sentences:

“[G]rowers, packers and shippers in the Pacific Northwest produce more than three quarters of the fresh apples and cherries, and approximately 84 percent of the fresh pears, grown in the United States. Mexico and Canada are the top export markets for apples and pears, with about 15 percent of the apple crop and 20 percent of the pear crop, worth approximately $442 million, shipped to our southern and northern neighbors each year.”

And this one:

“We expect that Canadian and Mexican industries, including the tree fruit industry, may take advantage of such a provision – [that is, the provision on seasonal and perishable goods that is now a tabled U.S. negotiating objective] – to restrict exports of U.S. products.”

There were 13 signatories to that letter, including –
From Oregon: Senator Jeffrey Merkley (D), Senator Ron Wyden (D), Rep. Kurt Schrader (D), and Rep. Greg Walden (R); and
From Washington: Senator Maria Cantwell (D), Senator Patty Murray (D), Rep. Denny Heck (R), Rep. Jaime Herrera Beutler (R), Rep. Suzan DelBene (D), Rep. Rick Larsen (D), Rep. Dan Newhouse (R), Rep. David Reichert (R), and Rep. Cathy McMorris Rodgers (R).

COMMENT

The items mentioned above can each stand alone. That said, we are likely to hear a great deal more about these and all of the other NAFTA issues in the months ahead. Even so, we are tempted to tack on four, somewhat disparate observations.

Retaliation. We have no quarrel with the letter to USTR from the members of the Northwest Delegation, certainly not with their concern that if the U.S. makes life more difficulty for, say, Mexican exporters of tomatoes, Northwest tree fruit exporters are bound to feel some countervailing pain. We suspect they are right. It is troubling however–not wrong but troubling – that so much of the discussion of possible NAFTA permutations hinges less on possible new provisions of law and more on a fundamental notion of practical reciprocity, an “eye-for-an-eye” sort of thing.

Perishable Products and the WTO. The WTO doesn’t get a lot of mention in today’s intense NAFTA discussions. It did come up, however, in a private conversation we had in the wake of our earlier reference to America’s NAFTA negotiating objective on perishable goods. The wise voice on the other end of the phone pointed out that, in its considerations of antidumping and countervailing duty issues, the WTO looks at annual trade. There is no provision for seasonal trade.

“Bilateral agreements should be WTO-plus,” our colleague said, meaning even more favorable to trade. “This would be WTO-minus.”

China. China may seem a non-sequitur in this discussion of North American trade. But when it comes to apples, China is the elephant in the room. According to a relatively current USDA estimate, the world will produce some 77.2 million tons of apples this year, more than half of them – 43.5 million tons — will be from China.  China is the world’s largest apple producer; the U.S. is number 2, with roughly 4.6 million tons.

Yes, China does buy a fair amount of apples from the U.S., but China’s exports here are growing – and if by here we mean North America – then you can add China to the list of countries that are eyeing the possible failure of NAFTA for new export opportunities for themselves.

Apples Nearby. Finally, a word about Sauvie Island , the apples pictured above and the trees below. They are hors de combat as far as this discussion is concerned, which is to say they are not exported. They are not even sold in grocery stores. These are pick-your-own apples from Douglas Farm on Sauvie Island. Just north of Portland, Sauvie Island on the Columbia River is one of America’s largest river islands and home to an array of farms, growing everything from corn to strawberries and apples to pears. The Douglas Farm is one of those and well worth a Sunday stroll if you are out this way.

At Douglas Farm, Sauvie Island rkm photo

SOURCES & LINKS

Is NAFTA Rotten is the op-ed the Wall Street Journal published on October 25 by Jim Bair, the president of the U.S. Apple Association, it argues that NAFTA has been important for U.S. apple growers and its demise would be a disaster. This was the source for today’s featured quote.

A Letter from the Pacific Northwest is a link to the September 20 letter mentioned above from members of the Oregon and Washington delegations, urging USTR not to pursue a new NAFTA provision on seasonal and perishable products.

U.S. Apples is the website of the U.S. Apple Association.

Negotiating Objectives takes you to the NAFTA negotiating objectives published by USTR earlier this year.

Delicious Fruit is a USDA estimate of apple production globally and in selected countries.

The Douglas Farm is a link to the website of the Douglas Farm on Sauvie Island.

Originally published on October 26 as TTALK Quote No. 61 of 217.

© 2017 Global Business Dialogue, Inc.

 

 

 

AN UNQUIET AUGUST

DOG DAYS?
by Joanne Thornton

As we approach what traditionally has been a month of recess in Washington, the policy agenda remains as hot as the weather. Unleashed by the Trump administration like a pack of greyhounds in the months following the president’s inauguration, several trade initiatives are now approaching decision points.

Section 232. An especially prominent one — the Section 232 investigation into whether steel imports are harming US national security — appears to have slowed its pace. Perhaps it will be subsumed within the exercise resulting from the president’s most recent executive order, directing the Defense Department to lead a nine-month study of the US defense industrial base. The same may be true of the Section 232 aluminum investigation.  And,

Trade Deficit. Even so, there are plenty of other impending reports and/or decisions that will keep trade mavens busy this summer. Two are overdue, and could pop up any day: an “Omnibus Report on Significant Trade Deficits,” now a month late.

Pipeline Steel. The other overdue report is a Commerce Department plan — technically due last Sunday — for use of American steel in pipelines.

Other upcoming items include:

Enforcement Priorities. This is a report to Congress by USTR on trade enforcement priorities, due by July 31 under Section 601 of the Trade Facilitation and Trade Enforcement Act of 2015 (PL 114-125). Essentially the latest iteration of the 1974 Trade Act’s “Super 301” instrument, the provision requires USTR to focus on “those acts, policies, and practices the elimination of which is likely to have the most significant potential to increase United States economic growth.”

China – The NME Issue. The Department of Commerce is reviewing its policies to determine whether China should continue to be treated as a “non-market economy” (NME) under US antidumping and countervailing duty laws. A finding is expected prior to mid-August, and it is widely anticipated that the Department will reaffirm current practice. Even if not surprising, such a decision would accentuate a deep rift with China. Beijing has challenged the use of NME methodology by the European Union and the United States in what USTR Robert Lighthizer has termed “the most serious litigation matter we have at the WTO right now.” Ambassador Lighthizer made that comment at a Senate Finance Committee hearing on June 21, and he asserted further that “a bad decision with respect to NME status for China . . . would be cataclysmic for the WTO. “

NAFTA Modernization. Mid-August also will see the formal initiation of NAFTA modernization negotiations, a process that the Trump administration hopes will produce more balanced trade among the three partners and a new and improved template for future free trade agreements.

Congress is watching and asserting its authority under Article 1 of the US Constitution. Stakeholders are having their say. While some further adjustments in direction and/or speed are possible, by summer’s end, America’s trade policy is likely to have been set on a transformative path.

First published as TTALK Quote No. 47 of 2017.

© 2017 The Global Business Dialogue, Inc.