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Tracking the tariffs

Current trade environment theatens stability of Washington state's agriculture industry

February 2019
By Trista Crossley


Trade, to put it lightly, is a pretty big deal in the Evergreen state.

More than 300 crops are grown here, worth $10.6 billion in 2017. The processed foods sector, in 2016, generated more than $20 billion in revenues, and the value of food and ag products that were exported overseas in 2017 was approximately $6.7 billion.

The current trade environment puts all of that on uncertain ground. Rianne Perry, manager of the Washington State Department of Agriculture’s (WSDA) International Marketing Program, said in regards to the retaliatory tariffs from China, many of Washington’s agricultural products are on at least one of the lists of targeted products, if not more than one. WSDA estimates that approximately $1 billion worth of Washington agricultural exports are at risk from retaliatory tariffs, including those from China, Mexico, Canada, the EU and India.

“Certain industry sectors have been hit pretty hard,” she explained. “For example, cherries are on two of China’s retaliatory tariff lists. Unfortunately, China was the number one market for Washington cherries. The first set of tariffs went into effect in the spring before the season started. When the season began, they didn’t seem to have too much of an effect. But in July, the second set of tariffs hit for an additional 25 percent, and that’s when things ground to a halt.”

Although the cherry industry is still trying to quantify the effect the tariffs have had, Perry said there are concerns that if the tariffs continue through this year, the China market could be closed permanently.

“That is a lot of fruit that has to go other places. Other markets are interested in our cherries, but they are a perishable, expensive, high-value product, and it’s difficult to find another market to take that volume. China was a premium market, paying the highest prices for the best fruit,” she added.
China is also a big market for Washington’s seafood industry. From July through October of last year, Perry said seafood exports to China were down 40 percent compared to last year. Dairy exports to China, for that same period, were down 73 percent. But it’s not just the Chinese tariffs that are taking a toll.
India has threatened to impose tariffs, although they haven’t done it yet. But because of the uncertainty the threat has caused, exports of pulse crops, such as chickpeas, to that country are down 80 percent from July through October of last year. India is the top market for pulse crops. Apple exports to India are down as well.

“There is a concern that some of these trade issues are forcing buyers to look at other markets,” Perry said. “The fear is that if this doesn’t go away, those countries will have created new relationships, and we will have trouble getting these markets back.”

Uncertainty is also being created by the U.S. not being involved in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which went into effect at the beginning of the year. Non-CPTPP members will be at a serious disadvantage as their goods will face higher tariffs than member countries. U.S. wheat, for example, will eventually cost Japanese buyers $85 more per ton than Canadian or Australian wheat. And it’s not just wheat. Washington beef, dairy, potatoes, tree fruit and wine are all concerned, Perry said. “Japan is a top market for many products, and they are concerned about losing market share from the U.S. not being part of that trade agreement,” she said, adding that the harm will also be seen by missing opportunities in growing countries like Vietnam.

The renegotiated North American Free Trade Agreement, now called the United States-Mexico-Canada Agreement, or USMCA, is also causing some concern. Perry said Mexico is a huge market for apples and dairy, and Canada is a huge market in general for Washington agriculture simply because of its proximity.

A helping hand

While the bigger commodities tend to have stakeholder groups, funded through grower assessments that help develop and maintain export markets and advocate for their growers, many other crops rely on WSDA’s International Marketing Program.

According to its website, the International Marketing Program supports the health and viability of Washington’s food and agricultural businesses and facilitates buyer-seller connections, delivers resources and continually advocates for global market access. The program has export development trade specialists in Olympia, Seattle, Yakima and Kennewick, as well as contract representatives in Japan, China, Korea and Vietnam. Perry broke the program’s mission into three core functions:

• Providing technical assistance to growers and businesses such as helping them understand export and import requirements and connecting them to the right officials to get products out of customs. The program’s overseas representatives, who are experts in their countries’ export and marketing of food products, can provide guidance on products that would be a good fit for a particular market or that particular country’s labeling requirements.

• Buyer-seller matchmaking, which is connecting Washington companies with potential buyers in overseas markets. This is mainly accomplished through trade missions and trade shows.

“We vet the buyers to make sure they’re the right type, that they have the right licenses, that they are the right type of company so we have the best possibility for success. Then we usually set up one-on-one meetings between the Washington companies and buyers. We often do site visits as well. That gives buyers a sense of how the seller functions,” she said.

• Advocacy. This usually involves Perry and other high-level WSDA employees meeting with foreign governments or participating in government trade missions, basically “…anything we can do to get in front of a government official who will work with the industry to bring up trade issues and try to move the needle,” she explained.

Although WSDA’s International Marketing Program does work with the larger commodity commissions on occasion, they mainly look for sectors that don’t have a lot of resources to do marketing activities themselves. The program is able to tap federal funding through the Market Access Program.

“We do a lot with seafood, mainly because there’s nobody else that can really help them, and we have a thriving seafood industry here in Washington state,” Perry said. “Blueberries are another example. There is a blueberry commission, but they don’t have an international marketing staff. The blueberry industry is exploding. There’s lots of blueberries, and they need to find a home.”

While much of the focus of the marketing program has been on the Pacific Asian region, Perry said they are also seeing interest from the Middle East and some of the Central and South American countries.

Late last year, WSDA Director Derek Sandison proposed a package of programs to help Washington agriculture mitigate the effects of the ongoing trade disruptions. His proposal would have provided funding for grant programs to help develop new markets and address nontariff trade barriers; created a labeling and marketing program to increase the visibility of Washington agricultural products; and enhanced funding for some existing WSDA programs to help with trade mitigation. The proposal also included a program to promote a Washington state brand for agricultural products. Unfortunately, funding for the package wasn’t included in Washington Governor Jay Inslee’s budget proposal. For now, the package is shelved.

Without that package, there is little more the WSDA or the International Marketing Program can do to help producers and food processors that are struggling to survive the challenging trade environment.

“Other than continuing our efforts through the International Marketing Program to help commodity groups explore new markets, there’s nothing beyond that that we can do,” explained Hector Castro, WSDA communications director. “The best we can do is continue to focus on the mission of the program.”