Apr 7, 2007

Dynamic Markets Pose a Challenge for U.S. Exporters

China, India and Brazil are large, developing countries with untapped populations and resources. Their markets are growing, as is their capacity for international trade. Their emergence onto the world economic stage brings with it opportunities and challenges for U.S. fruit and vegetable exporters.

Panelists discussed the changes being brought about by the three growing countries during a session called “Spotlight on Rising Powers: China, India and Brazil,” part of the International Trade Conference held April 29 in Chicago. The conference was part of the United 2005 Produce Expo & Conference.

“These three countries are on our individual list for top opportunities,” said Ellen Terpstra, administrator of the USDA’s Foreign Agricultural Service.

Terpstra and other experts discussed the benefits and risks of dealing with each country.

China

China is the world’s sixth largest economy. If its growth remains steady, it could become the world’s largest economy by 2041, said James Christie, president of Bryant Christie and the session’s moderator.

There are 50 million middle-class households in China. It’s the world’s fourth largest agricultural importer. It’s the fifth largest agricultural market for the United States. It’s the top export market for U.S. soybeans, cotton, wheat and other crops. There also are opportunities for citrus, juices and nuts, Terpstra said.

U.S. agricultural exports have tripled since China joined the World Trade Organization (WTO) in late 2001. After it joined the WTO, China started cutting tariffs and adopting more market-oriented policies, she said.

China’s trading environment is more open than it has been in previous years. U.S. trade representatives have made a concerted effort to talk to the Chinese about adherence to international rules and to work out bilateral trade problems, she said.

The city of Hong Kong’s residents have a higher income level than residents on the mainland, making it a more mature market. Room for market growth is scarce, but Hong Kong’s role as a gateway to the Southeast China market could increase, Terpstra said.

The panelists agreed that China is a critically important market, especially for citrus, juices and apples.

“You can characterize China as a gold rush,” said Jim Travis, vice president of Asia-Pacific, Latin America and the Caribbean for Ocean Spray International. “There’s a huge opportunity for juice consumption to develop.”

Chinese consumers like eating U.S. apples, said Tracy King, director of marketing for Dovex Fruit Company.

“I see the glass as three-quarters full,” he said.

India

India could be a major wild card in agriculture. The country has a huge, young, dynamic population. It elected a new government last year, and its new prime minister is under immense pressure to help rural Indians, Terpstra said.

India’s income is a fraction of China’s, but its food consumption is expected to double by 2020. If India’s growth rate continues, it could surpass Japan as the world’s second largest economy by 2032. However, its agricultural tariffs are high, panelists said.

“We continue to notify India of the need for reductions in tariffs,” Terpstra said. “They’ve considered some.”

India is an extremely bureaucratic country, with a bit of a xenophobic streak and an emphasis on self-reliance. Indians want to do everything internally, panelists said.

“Democracies tend to get pressured by interest groups,” King said. “We’re saddled with a very difficult tariff.”

However, India has great potential for Washington state apple growers. Indians genuinely like eating Red Delicious apples, he said.

India’s cultural differences, high tariffs and its distance from the United States make it a difficult market, said Mike Wootton, vice president of corporate relations for Sunkist Growers.

Brazil

Horticultural exports to Brazil have been disappointing, but there is an opportunity for increased trade. Brazil is the world’s largest coffee producer, has the world’s largest cattle inventory and has 3 million middle-class households. U.S. agricultural exports to Brazil were valued at $325 million last year, Terpstra said.

Brazil has made progress lately on agricultural reform and liberalization, she said.

“We’ve seen positive signs on the trade policy front,” she said. “We’re pleased with Brazil’s constructive role in advancing progress.”

Brazil’s market is a challenge for U.S. juice producers, panelists said.

“I don’t know much about Brazil, except they make too much orange juice,” Wootton said.

The future

The panelists expressed cautious optimism for the future. Foreign countries are buying more U.S. fruit and vegetables, Terpstra said.

“We see a number of opportunities,” she said. “We’re forecasting exports for 2005 will be higher.”

U. S. import tariffs are low compared to other countries, so any deal made during trade negotiations is usually a good thing for the United States. However, with growing competition from dynamic markets like China, India and Brazil, U.S. fruit and vegetable producers must continually adapt to keep their edge in the global marketplace, Christie said.

“The question is: Are you ready?” he asked the audience. “Can we survive while these markets are developing?”