Stalled Asian Trade Deal Could Impact Arkansas Crops

Stalled Asian Trade Deal Could Impact Arkansas Crops
 The Trans-Pacific Partnership has a chance to open large Asian markets to U.S. products, like rice, of which Arkansas is a leading producer.

The view from afar of negotiators trying to hammer out a trade deal might have a certain Rube Goldbergesque quality.

It’s a trade deal.

You want to buy. We want to sell.

Let’s get this done.

But there is nothing simple about international trade agreements, and Arkansas farmers, ranchers and loggers have found themselves caught in the middle of tense talks as U.S. officials try to finalize a huge deal in Asia.

Since 2005 the United States has been part of a group of nations working on the Trans-Pacific Partnership. China, Japan, Singapore, Canada, Mexico, Australia and other countries have seats at the table. Though the pact would involve trade across a wide swatch of economic sectors, agriculture has often been at the heart of the agreements and disagreements. Japan, for example, has refused to allow U.S. rice to be part of the deal.

Still, TPP, as it is known to insiders, has a chance to open large Asian markets to U.S. products in general and Arkansas agricultural products in particular.

“China, Japan, those are important markets for us, but we have to engage these markets and try to level the playing field in the global marketplace,” said Rep. Rick Crawford, who represents the agriculture-rich 1st District. “We have to set rules so we are all on the same page. It takes years, in some cases, to get these hammered out.”

The congressman said agriculture protections have often caused the negotiations to break down.

“Agriculture has been, historically, a sticking point. In Korea, U.S. rice was excluded. Rice took one for the team there, just to get the deal done,” he explained.

Vietnamese cotton producers objected to U.S. imports, causing another hiccup, Crawford said. A litany of agriculture complaints continues to stall TPP.

“There is a huge void in the Pacific Rim that they need the United States to fill, a leadership void, a meeting demand void,” he said. “There are cultural but also manufactured problems that could be addressed if they just wanted to.”

Rice industry officials in Arkansas are cautiously optimistic that the state’s top crop will ultimately be part of the partnership.

“In recent years and months, China has been more eager to trade,” said Ben Noble, executive director of the Arkansas Rice Federation. “The holdup at this point is a ‘sanitary’ agreement — food safety issues, how our crops are stored, dried and cleaned. Most of the negotiation is done. I hope China is serious about opening the market.”

In many ways, though, the Chinese market is already open to U.S. commodities. China is set to become the largest buyer of U.S. agriculture exports, accounting for 19 percent of the national output. Statistics compiled by U.S. Department of Agriculture indicates that agriculture trade with China could reach $28 billion this fiscal year, up from $23.5 billion in 2013.

Boon Tan, senior director of Global Trade Development states at World Trade Center Arkansas, agreed with the forecasted increase in China trade.

“In my opinion, the agriculture trade flow between the two countries will continue to increase, granted with some hiccups along the way,” Tan said.

According to United States Department of Agriculture-Foreign Agriculture Services (USDA FAS), China is already the largest international market for U.S. food and agricultural products, with exports reaching a record $23.5 billion this last fiscal year.

Though a variety of U.S. commodities find their way to China, many barriers and policies remain in place that stifle the individual markets. For example, a Chinese policy that prevents the nation from stockpiling cotton has flooded the global market in recent years, pummeling the price that U.S. producers can earn for their crop.

However, Chinese reserves have nearly exhausted and USDA forecasters expect cotton prices to increase this fiscal year. China has increased imports of soybeans, but genetically modified varieties remain an issue.

“The consumption of protein such as chicken and fish have increased tremendously throughout Asia. With this increased consumption, there is also an increased demand for soybean exports from the United States,” Tan said. “Further, Asian consumers have a keen desire for non-genetically-modified soybeans. Most Asian countries mandate non-GMO soybean for human food production. Asian countries are also exporting large quantities of aquaculture products to the European Union markets. The European Union only allows importation of aquaculture products that are fed with non-GMO soybeans.”

Tan contended that Arkansas producers have the capacity to serve Chinese and other Asian markets.

“Arkansas is positioned to provide an increase of Agricultural exports to fill the demand of protein consumption and non-GMO soybeans as may be required for the specific countries. Arkansas continues to export 50 percent of its soybean crops throughout the world,” he said.

In addition to the commodity staples exported to China, a number of specialty crops are becoming more important exports.

Andrew Grobmyer, executive vice president of the Agriculture Council of Arkansas, noted that Arkansas farmers are producing niche products specifically for Asian markets.

“There are special commodities going to China, Vietnam and Japan. There are special soybean varieties going over there because there is a demand for tofu and other food-grade soybeans. We are growing a market for down the road,” he said. “These niche products carry a higher price, but they are complex. You have to meet the sanitary requirements that the buyer might have. That’s why a lot of people haven’t jumped into it. You have to be pretty savvy and pretty sophisticated and pretty willing to work beyond the regular day.”

(Read more from the latest digital issue of Arkansas AgBusiness.)