Date: Jul 15, 2020
Magazine:
July/August 2020

It is fair to say that 2020 has thus far proceeded in ways no one could have predicted. The issue that is top of mind for the industry is the ongoing coronavirus pandemic and economic fallout. While much of the attention and impact has been domestic-facing, COVID-19 has also thrown international supply chains into disarray. Given the significant global economic shock and expected lingering effects in markets around the world, U.S. agricultural export projections for the remaining year are falling. USDA’s own recent export forecast dropped by $3 billion from just five months prior.

It is worth noting that USDA has also forecasted that U.S. agricultural exports to China may top out around $13 billion for the year. This is far from the $80 billion-over-two-years purchasing commitment China made in the U.S.-China phase one agreement, which went into force in February. Of course, the main culprit has been COVID-19, which essentially ground China’s economy to a halt. However, as it has started to reopen, the agreement’s payoff for specialty crops has been mixed. Commodities like citrus have seen higher export sales compared to last year; this is not the same case for tree nuts. The deal opened China for the first time to U.S. nectarines, avocados and blueberries; given that steep retaliatory tariffs remain on these products, it remains to be seen how accessible the market will actually be.

Other external factors are also keeping phase one watchers on their toes. The current relationship between the United States and China is tenuous and strained, largely due to China’s apparent failures and secrecy at the onset of the outbreak, as well as for its recent unprecedented overreach into Hong Kong. The United States has taken several provocative actions against China, and China in turn has dug in and traded arrows. All the while, both American and Chinese trade officials have made public statements attesting that the deal is secure and moving forward. Although President Trump has made known his frustrations with China and this deal, given the precarious economic situation in both nations, adhering to the deal—not abandoning it—appears to be the safer route.

Looking at other recent trade deals, progress on both the U.S.-Mexico Canada Agreement (USMCA) and U.S.-Japan Trade Agreement has moved forward relatively unhampered. By July 1, USMCA is to be fully enacted. At the same time, the U.S. Trade Representative (USTR) office remains committed to restart negotiations with Japan on a phase two agreement, hopefully as soon as this year. For agriculture, a phase two deal represents the best, if not the only, chance to resolve remaining tariff issues and secure significant reforms to Japan’s notoriously complex pest-and-disease protection regime. Elsewhere, a deal with India is nonexistent, as is one with the European Union.

Outside of bilateral negotiations, the EU continues to be an extremely contentious player in the agricultural trade arena. In May, the EU released a “Farm to Fork” Strategy that calls for extreme cuts to domestic use of pesticides and other inputs. This strategy builds upon the EU’s long history of agricultural policies that give deference to public activism over sound science. The EU has also made no secret of its goal to influence, and even pressure, other countries to adopt its anti-crop protection model. Indeed, we have seen more countries move to rein in pesticide approvals and usage, including Mexico, India, Vietnam, and Thailand. For fruits, vegetables, and tree nuts, unworkable sanitary-phytosanitary (SPS) standards are quickly becoming the biggest barrier to trade, and the prospect of more EU-like systems in potential markets is nothing short of alarming. Thankfully, the United States has not stayed quiet and continues to build an international coalition of nations that share our goal to push back against the EU mindset.

2020 has brought forth short-term and long-term challenges that have the potential to drastically alter international trade for our industry. Western Growers remains active, both to provide immediate assistance and advocacy for members as well as to work with our agricultural partners to plot out trade opportunities for the decades to come. As the pandemic continues to give rise to new unforeseen challenges, we strongly encourage all members to utilize our team and resources to support your business.

WG Staff Contact

Tracey Chow
Government Affairs Specialist
202-296-0191 x7301

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