Foreign trade: It’s complicated
Complicated.
It’s a word that kept coming up as John Keeling, National Potato Council’s (NPC) CEO and executive vice president, discussed foreign trade agreements such as the North American Free Trade Agreement (NAFTA) and the Trans-Pacific Partnership (TPP) in the face of the incoming Trump administration.
“I think that we’re entering a phase where we don’t really have a clear understanding of what’s going to happen,” Keeling said nine days after the presidential election. “I think you’ve had the rhetoric on the campaign trail and you’re going to see how that rhetoric transfers into actions.”
TPP is not coming up for congressional approval without some alterations in the current 12-nation agreement, Keeling said.
“I think that the best we can hope for there is some sort of a modification,” he said. “With some sort of rebranding, maybe it becomes a good trade deal that President Trump is comfortable with and then maybe 18 months into his presidency we have the potential to see that thing move.”
Meanwhile, Trump’s threat to repeal NAFTA could result in thousands of tariffs being reestablished. The very complexity of such a situation could be a little sobering, he said.
“If we establish tariffs on some goods coming into the U.S. from Mexico, you can expect that Mexico will look around and say, ‘well we get a lot of french fries from the U.S. and therefore we’re going to put a tariff on U.S. french fries,’” Keeling said.
He cited the NAFTA truck agreement between Mexico and the U.S. as an example of what can happen when disagreements erupt over past agreements.
“We all know what happened during the Mexican trucking deal that came out of NAFTA,” Keeling said. “We saw french fry exports drop dramatically to Mexico, and our friends to the north in Canada picked up all that business.”
Repealing NAFTA and failure to pass TPP by the U.S. would present European Union countries with a significant trade advantage, he said.
“They’re (E.U. countries) going to be doing bilateral agreements and multi- lateral agreements with some of those countries that are big export markets,” Keeling said. “With french fries, if you lower the tariff 2 or 3 percent, they’re trading like a commodity. So very small changes in price make big differences in where people buy their products. It can certainly have an impact if we fall behind in that area with some of our big trading partners over there.”
With all the complicated trade scenarios facing the potato industry, Keeling is taking a wait-and-see approach.
“I’m going to hope, to watch and see, and hopefully then we see some pragmatic approaches to some of these problems coming,” he said.
While the future of export markets is cloudy and complicated, the present trend has been looking good for U.S. exports, according to statistics released by Potatoes USA.
Total U.S. potato exports for the July 2015 to July 2016 marketing year went up 4 percent in value compared to the previous year. This represents the second-highest level on record, according to Potatoes USA.
John Toaspern, Potatoes USA chief marketing officer, said that export numbers for the first quarter of this fiscal year continue to look good, particularly for the frozen and fresh sectors.
“We’re on a pace to exceed what occurred last year,” Toaspern said of total U.S. exports.
He said that U.S. exports should benefit from the poor European crop size and their higher domestic prices.
“We anticipate that their export prices will go up a little bit,” Toaspern said. “So that should create some opportunities again, particularly for frozen but possibly for dehy as well.”
While the winds of political change could create chaos among trading partners, the U.S. potato export industry is continuing to secure market access for its frozen, dehy, fresh, chips and seed sectors in a number of countries.
It’s been said that the race does not always go to the swift, and that would be an apt description of trade negotiations during the second half of 2016.
China
Matt Lantz, vice president of global access for Bryan Christie and NPC international trade consultant, said that a meeting and tour of the Pacific Northwest potato industry, scheduled for mid-September, with trade officials from the People’s Republic of China did not occur. However, China and the U.S. did have bilateral technical talks in Chicago in October.
“There were positive exchanges on several issues,” Lantz said. “We’ve offered to have a technical meeting to address some of the remaining technical pest issues. The Chinese are going to let us know if that should occur, and once that occurs, hopefully they’ll visit next summer.”
Lantz said that he has been working on fresh potato access to China since 2000.
South Korea
The big issue in South Korea is maximum residue levels (MRLs). Korea is changing its existing deferral system to its own national system.
“You’ll need a Korean MRL starting at the end of December 2018,” Lantz said. “What that involves is industry officials going to meet with chemical companies with a list of potato MRL needs for their products and asking them to make the data submissions to Korea.”
Lantz said that the chemical compaies are aware and making submissions.
“We have had some potato MRLs established during the last year, so it’s all pointing in the right direction,” he said.
On reestablishing table-stock market access from the Pacific Northwest, positive talks occurred in September in Seattle, and USDA is waiting for a response from the Korean government.
Japan
The three issues Lantz is working on in Japan: 1) reinstatement of access for Idaho potatoes. Japan imposed a phytosanitary ban of Idaho potatoes because of the pale cyst nematode found in Bingham County and Bonneville County; 2) Nebraska access; and 3) year-round access of U.S. potatoes. Talks on each of these issues are occurring.
Indonesia
Market access is on hold until the U.S. can respond to technical questions from Indonesia.
“We’re working with Animal and Plant Health Inspection Service (APHIS) to make a response to those questions,” Lantz said. “They were pretty technical and APHIS scientists had to review them.”
Egypt
“It’s frustrating,” Lantz said of trying to get market access for U.S. seed.
“We were hoping to have a visit this year from Egyptian officials, but that visit did not occur,” he said. “We have thought at times we were close to opening the market, and we have been told in the past that all the technical issues have been addressed. Then we will receive more technical questions. Egyptian access has been very challenging.”
Taiwan
“We’ve had some problems with rejections in Taiwan of chipping potatoes,” Lantz said. “They’ve been rejected for breakdown of product on arrival. We’re working to overcome this, and by encouraging Taiwan to allow for unaffected potatoes to be processed, this is so we don’t have these challenges going ahead.”
Panama, Costa Rica and Dominican Republic
Lantz said that the agreement with Panama is complete and the first seed shipments hit the Panama docks this pastyear.
Costa Rica re-opened its market for the first time in two years to chipping potatoes, Lantz said.
“We have had some challenges upon arrival, some delays, clearances, things like that,” he said. “The market is officially open; we’re just trying to make it a smoother export transition.”
Lantz said that the Dominican Republic markets are “technically open,” but the government doesn’t always issue an import permit.
“They allow some but they don’t always allow as much as we request,” he said. “It’s kind of more of a harassment than an absolute denial of import product.”
They are in talks to try and resolve the problem with Dominican Republic officials, Lantz said.
