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March 23, 2020

Trade, Trade and Trade Again

It has been an incredibly busy few months for international trade here in Washington and Western Growers has been right in the middle of it all. Let me start by talking about the United States-Mexico and Canada Agreement (USMCA), which, as you all know, replaced NAFTA (North American Free Trade Agreement).

The USMCA was signed into law recently and while that trade pact’s biggest victory for our sector was getting trade back to normal and reducing the uncertainty that trade conflicts with Mexico and Canada had created, there were improvements around labor that we pushed for and are beneficial. When the USMCA negotiations started, we advocated for changes with regard to Mexican labor. In the labor chapter, Mexico agreed to tighten its laws concerning child labor, as well as migrant labor, to prevent abuses. In addition, Mexico also agreed to allow more unionization. These changes will promote better working conditions and higher wages for Mexican workers, which will at least start to create fairer competition with the United States. When the negotiations concluded in May, but before Congress had passed the bill, WG board member, Albert Keck, participated in a ceremony at the White House with President Trump praising the agreement.

In October, then-Western Growers President Tom Nassif also participated in an event at the White House concerning phase one of the US-Japan trade agreement. For years, Western Growers has been pushing to secure enhanced tariff access for fruits and vegetables into Japan. Phase one of the US-Japan trade agreement does much of what we have asked for. As such, we are happy with what the administration has been able to secure with the Japanese, but we continue to be active since there will be a phase two of this agreement. In phase two, Western Growers will concentrate on technical barriers to trade that Japan has been using to block entry of agricultural products for decades. Apples and potatoes, for example, have been fighting for years to gain entry into Japan, but have been blocked by these non-scientific trade barriers. These barriers are Western Growers’ number one priority for Japan going forward and we are working with and helping to organize other trade associations to tackle them. While we obviously acknowledge that every country has the right to keep out pest and disease, we believe that the Japanese system needs to be reformed to ensure that it conforms with modern scientific standards and is not used to block U.S. exports.

Finally, last month Western Growers Chairman Ryan Talley was at the White House during the signing of the US-China phase one trade deal. Under the phase one agreement, China is committed to returning to and then significantly surpassing the volume of agricultural purchases that it made before the trade war started in 2017. Indeed, China is supposed to purchase roughly double what they were buying in 2017.

While we are hopeful, and expect, that fruit and vegetable purchases will return to normal and then increase as a result of this agreement, neither China nor the US government have provided details concerning the volume of purchases for any individual crop. As such there are questions about this deal going forward, and Beijing has a history of backsliding on such pledges.

Beyond these practical questions, the Trump Administration agreed not to impose additional tariffs in December on roughly $160 billion in Chinese imports—including popular consumer items such as cellphones and laptops—as part of the phase one agreement. Yet steep 25 percent tariffs remain in place on much of what the United States buys from China, while Chinese tariffs remain in place on American exports.

Why were all these tariffs left in place? Each country wants to create or maintain leverage on the other as phase two negotiations get underway. The phase one China deal leaves many U.S. strategic goals out, including addressing the Chinese government’s enormous subsidies to state-owned enterprises. The phase two negotiations promise to be very difficult. While Western Growers is pleased with returning trade to normal, which we hope phase one signifies, we continue working to answer some of these practical questions. As an example, we are organizing a visit to the Chinese Washington, D.C. embassy for all interested fruit and vegetable associations to ask the Chinese government how they plan to implement their trade purchase commitments. Since Chinese tariffs remain in place, do they intend to grant blanket exemptions? Do they intend to have state-owned trading companies buy products under waiver? Basically, we will be asking how will our products get into China.

It has been a very busy year, especially the last few months, concerning trade. We look forward to serving you in the months ahead on the topic.