May 30, 2013
Are Chinese apples the biggest threat?

For a long time, John Rice – vice president of Rice Fruit Co., an apple grower and packer based in Gardners, Pa. – was a strong proponent of keeping fresh Chinese apples out of the United States. His main concern was the threat of new pests and diseases showing up in U.S. orchards.

Over the last several years, however, Rice’s position has shifted. His changing attitude seems to reflect a shift among many in the U.S. apple industry.

For one thing, China has been putting a lot of pressure on the U.S. government to open the U.S. market to Chinese fresh apples, and the outcome appears to be inevitable, Rice said.

“We’re not going to keep Chinese apples out of the American market indefinitely,” he said.

If fresh apples from China are coming whether U.S. growers like it or not, it might be time to seek something in return, something they don’t have right now – like full varietal access to the Chinese market. A growing fear, for Rice and others, is that the United States will open its borders to Chinese apples but U.S. apple interests will get nothing in return.

Besides, there’s a bigger threat to apple growers in the eastern United States: Washington. Even under normal circumstances, Washington state grows more apples than the rest of the country combined, but the record-breaking size of the state’s 2012 crop convinced Rice that allowing Chinese apples is worth the risk if it means that surfeit of Washington apples has access to China.

“The Chinese government operates very much on a barter system,” Rice said. “They don’t give anything away unless they get something in return.”

Washington growers harvested more than 129 million bushels of fresh apples last fall, shattering the previous record of 109 million bushels set in 2010, according to the Washington Apple Commission (WAC).

Rice hadn’t realized that Washington was capable of such an “alarming” increase. And it could have been bigger. Without a major hailstorm last summer, the state could have produced perhaps 140 million fresh bushels, he said.

“We don’t have enough overseas markets to absorb all those tens of millions of extra boxes of Washington apples,” Rice said. “Unless we open the door somewhere, those millions of boxes will be looking for a market in the eastern United States.”

Jim Allen, president of the New York Apple Association, is familiar with the China/Washington conundrum. He said tens of millions of extra bushels, no matter where they come from, are a threat to a profitable apple market.

“Nobody is saying we welcome Chinese apples,” Allen said. “We don’t want them. We’re growing plenty already.”

But Allen understands that the more Washington apples that are exported, the better it will be for New York growers. He also understands that Washington cannot expand its exports by the needed volumes without having access to a huge market like China.

The U.S. Apple Association (USApple) has consistently stated that it doesn’t support the importation of fresh Chinese apples if doing so would damage U.S. orchards, but in January, the association’s public affairs committee adopted a provision to that long-held policy. President Nancy Foster put it like this: “Our industry would strongly oppose Chinese apples coming in without full varietal access to China,” she said. “That would be the worst of both worlds.”

Todd Fryhover, WAC’s president, made a similar statement.

China’s massive middle class has been a huge consumer of Washington apples, despite the fact that China is the largest producer of apples in the world. If Washington growers were allowed full varietal access, it could double their market growth, he said.

Chris Schlect, president of the Northwest Horticultural Council, Yakima, Wash., said apples from other countries are already in the U.S. marketplace. Where they originate from is not the issue. Pests and diseases are the issue.

“The point is not to exclude one country just because of the country’s name,” Schlect said. “Exclusion should be driven by phytosanitary concerns.”

There are concerns about competition, of course, but the positives of full U.S. access to China would far outweigh the negatives of Chinese access to America – especially given the known quality of U.S. apples, Schlect said.

“We feel we could ship more fruit into the Chinese market than they would ship to our market,” Fryhover said.

Growing frustration

China started to flex its muscle in the international apple trade in the 1990s. Thanks to cheap apples, cheap labor and the latest technology from Europe, the huge Asian country became a dominant player in the apple juice concentrate trade – pretty much decimating the industry in the United States, said Desmond O’Rourke, an international fruit trade analyst based in Washington state.

On the other hand, China’s fresh apple industry has been trying to crack the U.S. market for 13 years with no success, Fryhover said.

As of May 2013, USDA’s Animal and Plant Health Inspection Service was still negotiating phytosanitary issues with Chinese officials, and had not yet decided whether or not to open U.S. borders to that country’s fresh apples.

The Chinese, who’ve made it clear that getting their fresh apples into the U.S. market is a top priority, appear to be growing impatient with the lack of progress, said Jim Archer, manager of Northwest Fruit Exporters, based in Yakima, Wash.

In August 2012, China closed its borders to U.S. apple exports, Fryhover said. (Red and Golden Delicious had been the only fresh varieties from the United States allowed inside China.)

According to Chinese officials, the ban was due to phytosanitary diseases and decays detected on U.S. apple shipments, but that claim doesn’t appear to have much justification, Archer said.

In the opinion of Archer and others, the Chinese are using the ban as leverage – a way to force the United States to open its market. U.S. apple interests hope China will reopen its borders before the coming shipping season, but Archer didn’t know when or if that would happen. As of May, U.S. exports were still prohibited.

At this point, it’s a matter of national pride for the Chinese, O’Rourke said.

“If we want access to the Chinese market, it’s very hard to deny them access here on anything other than phytosanitary grounds,” O’Rourke said.

But even if Chinese fresh apples are allowed, it won’t be a repeat of the apple juice situation. The Chinese are facing rising costs and declining exports – and domestic demand has been so strong lately that it hasn’t made much sense for Chinese producers to jump through the export hoops in other countries. The amount of fresh apples likely to enter the U.S. market is very small, he said.

China’s food safety record will be another obstacle. The American public, in general, will be slow to respond to Chinese apples, O’Rourke said.

“I do not see some big eastern chains being in a rush to bring in cheap Chinese apples – even if they were cheap, which they aren’t right now,” he said.

If the Chinese market remains closed to Washington apples, that’s going to be a bigger problem for eastern growers. Washington will end up sending more apples east, where they will face no trade barriers, O’Rourke said.

A simpler solution?

Of course, if there were fewer Washington apples, eastern growers wouldn’t feel so much pressure to do something about them. But trying to convince Washington producers that less is more is difficult, Rice said.

“I suggest to my Washington friends, whenever I see them, that they grow less,” he said with a laugh. “It doesn’t seem to have made a big impact on them. I’m hoping they will see the light shortly.”

Matt Milkovich




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