China has been a hot topic in Trump’s race for the presidency. A recurring theme of his election campaign was that United States’ trading partners, in particular China, have taken advantage of the United States in trade.
In his 7 Point Plan to ‘Rebuild the American Economy, and ‘Make America Great Again’, China is mentioned in three out of seven points. In addition, Trump has proposed heavy tariffs on all imported Chinese goods (of 45%) and for goods from Mexico (of 35%).
Trump, to start with, is declaring China a currency manipulator. In addition, Trump is instructing the U.S. Trade Representative to “bring trade cases against China”, in the US as well as at the WTO, to stop China’s “unfair subsidy behaviour”. A proposal he has made is to prevent Chinese state-owned companies from make acquisitions in the US. Finally, Trump calls to “seek every lawful presidential power to remedy trade disputes” with China, including the application of trade tariffs.
The main question remains whether Trump, once in office, will be able to execute and implement the changes he is proposing. For the fresh produce industry, however, even without full implementation of the policies above, the changing winds in the USA might have an effect.
Anti-dumping lawsuits
An example could be the 2016 anti-dumping lawsuit against Zhengzhou Harmoni Spice, a large Chinese garlic exporter.
At the beginning of this year, New Mexico garlic growers, Stanley Crawford and Avrum Katz, formed the New Mexico Garlic Growers Coalition and have started to take legal actions against one of their competitors that, they claim, is not charged with U.S. anti-dumping duties. Through a loophole in Commerce Department Regulations, Harmoni Spice was allowed to avoid import duties of 2 USD a pound on garlic. Records used in the court case show that the company has imported over 60 million pounds of garlic, at favourable prices, into the USA between 2012 and 2016.
China currently is the world’s largest producer of garlic, with a total output of 19 million metric tons annually. The US produces only a fraction of this at 175,000 tons a year. Currently garlic wholesale prices in China are less than a Euro per kilogram. American anti-dumping policies can add another 4,50 Euro (4,70 USD) onto imported garlic prices to protect American producers and to ensure a level playing field.
These trade tariffs bring Chinese garlic prices in the US on par with American wholesale prices. Chinese garlic enjoys a 25 percent cut of the U.S. market. Roughly 65,000 metric tons of garlic was imported from China in 2014, according to the lawsuit: 25 percent of the annual U.S. consumption of 260,000 metric tons.
Harmoni Spice, in turn, filed a lawsuit against their opponents, claiming that their allegations are purely focused on bringing down the company and undermining it’s position on the US market.
The case is undecided. It shows, however, that, if made more aware and encouraged to take action, individuals and companies might more easily, and with institutional support, bring trade cases against China. A tendency that might be supported under Trump’s Presidency, if he persists in implementing his 7 Point Plan to fight cheap Chinese imports.
Concerns
Trump’s Presidency has not started yet, but rumours and concerns among Chinese growers and exporters are starting to gather momentum.
“Currently, only three companies can export garlic to the USA. We used to be able to export garlic in the past, but it has been made too difficult. Now we only focus on ginger, taro and lotus root,” says the owner of a vegetable export business from Shandong.
His views are shared by another exporter from the province: “The USA is a big market, and a big producer of agriculture products. The US garlic market specifically is huge and very attractive. However, we do not have the capacity, time or resources to become involved in anti-dumping lawsuits in the USA that we know are currently ongoing. As such, we do not target that market any longer.”
A pear grower and exporter also feels that the situation has already started to change: “Recently, export and quality controls in the USA have intensified. Of course our products were tested in the past. Now spot checks and other quality tests are taking more and more time, and requirements are becoming harder to meet. I feel that under Trump, this problem will become more serious.”