Protectionism and trade conflicts are impacting the produce industry in several ways; with the landscape constantly changing, predicting the future is challenging to say the least.
Richard Owen, vice president for global membership and engagement at the Produce Marketing Association BB #:153708, agrees: “The trend seems to be uncertainty.”
Tom Stenzel, president and CEO of Washington, DC-based United Fresh Produce Association, BB #:145458 had this to say: “There’s an increase in protectionism all around the world,” he observes, “but it’s a global produce industry and we have to understand that—no one’s going to win by creating steep barriers to trade. Strong competition makes you better.”
“We’re concerned about the lost markets that have resulted from the trade disruptions,” adds Tom Nassif, who is retiring from the Western Growers Association BB #:144734 in Irvine, CA. “Our farmers are competing in a global marketplace with rivals who are already taking advantage of these supply gaps. They will be difficult to dislodge in the aftermath of any resolution to the trade conflicts.”
Awaiting USMCA
Trade negotiators for the United States, Canada, and Mexico agreed to the terms of the United States-Mexico-Canada Agreement (USMCA) as a replacement for the North American Free Trade Agreement (NAFTA) back in September 2018.
Last month, the U.S. House of Representatives overwhelmingly passed USMCA, and the Senate expects to take it up very soon.
Most industry players, in all three countries, support ratification. Both Owen and Stenzel tout the stability it will bring, as well as modernization, such as new technologies to increase efficiencies at the border, according to Owen.
Not everyone is a fan of the new agreement. “We’re for free trade, but it must be fair trade,” comments Lisa Lochridge, director of public affairs for the Florida Fruit and Vegetable Association BB #:153753. “The devastating impacts to the Florida produce industry we experienced under NAFTA will only grow worse under USMCA.”
Taunting and tariffs
Beyond the USMCA, there are other issues. “Looking ahead to 2020, there’s the lingering threat of higher tariffs on Mexico tied to border security demands,” Nassif says. “This would likely have a notable impact on the fresh produce sector, since a significant percentage of the U.S.’s fruits and vegetables are imported from Mexico.”
Last spring, President Trump threatened dramatic tariffs on all Mexican products or to shut down the border to trade entirely. “All sectors of U.S. industry, not just produce, went ballistic when that happened and I think the administration got the message,” points out Stenzel.
“That was very unnerving to the U.S. and Mexican industries,” agrees Owen. While this specific threat has gone away for now, he says, it still had an impact. “Our Mexican colleagues are looking to diversify to other countries, so they’re not as dependent on the United States if trade is disrupted.”
Global uncertainty
The trade war between the United States and China continues to have an impact, especially on the Pacific Northwest apple industry, which saw exports to China fall by 30 percent. Other fruit exports were also affected.
“There’s no relief in sight for taking these commodities off the list or for the trade war to be ratcheted down,” contends Owen, who believes China will continue to be a key concern in 2020. “These are the two largest economies, so it puts a shadow over the entire world.”
Stenzel concurs: “We need to get that battle behind us.” He also echoes Owen’s thoughts on trading partners finding new suppliers. “Long term, retail customers in these countries will find alternative sources of supply, and once the tariff issue is resolved, they won’t come back.”
Other trade-related challenges include trade with Japan, the European Union, as well as the United Kingdom related to Brexit.
This is a multi-part series adapted from the January 2020 issue of Produce Blueprints, featuring a variety of experts predicting what will be top of mind in 2020.
