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Hurdles remain on China trade deal

us-china trade

For fresh produce companies to benefit from Phase 1 of the U.S.-China trade deal agreed to last week, China’s commitment to purchase has to turn into certainty.

Industry analysts said there are many opportunities for produce companies to benefit, but there’s much work remaining. For instance, tariffs remain on many of the top U.S. produce items exported to China.

The Phase One agreement says China will purchase and import $40 billion worth of U.S. food and agriculture products in each of the next two years, but it leaves much flexibility, which could benefit produce exporters.

“I think China could easily absorb imports of produce,” said International trade expert Devry Boughner Vorwerk, CEO of DevryBV Sustainable Strategies. “They should look at higher value items like produce.”

Richard Owen, a vice president at the Produce Marketing Association BB #:153708 and global trade and policy expert, agreed, saying fruits and vegetables could see big wins that wouldn’t be too noticeable in the larger scheme.

“We can get a big bump, while soybeans may be more disruptive,” he said.

The tariff issue is still a major problem, as there’s no specific remedy in the deal, Owen said.

It’s not clear how China will get to that large import figure of $40 billion, whether it lowers tariffs and lets the market dictate what comes in or makes government mandates and purchases.

Boughner Vorwerk said produce companies should push for free market access.

“One concern is that while we’ve had this pause, it will turn more into a managed agreement than market,” she said. “There’s likely more demand pull if the market can operate,” she said, since many U.S. fruits and vegetables find strong consumer acceptance in China.

“Produce needs to continue to work with the U.S. Trade Rep to find out more certainty, what the next steps will be,” she said.

Owen said the industry segments that took the biggest hits during the trade dispute with China, such as citrus, apples, grapes and cherries, will certainly work with the Trump Administration this year to figure out how they can regain access.

He said another positive from the Phase One deal is that the U.S. and China agreed not to implement food safety regulations that are not science- and risk-based, which is a good sign for the potential harmonization of standards for fruits and vegetables.

Boughner Vorwerk agreed the commitment to work together on standards is a big positive for the produce industry.

She said ideally this agreement would be a step toward a broader free trade agreement between the U.S. and China, but anything beyond Phase One is unlikely before the November presidential election.

Greg Johnson is Director of Media Development for Blue Book Services