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Horticultural Trade Under Liberalization:
A Brief Summary
The United States and Canada began eliminating import tariffs and other restrictions to trade when the U.S./Canada Free Trade Agreement (FTA) was implemented in 1987. The accord was expanded in 1994 to include Mexico with the implementation of the North America Free Trade Agreement (NAFTA). Since then, trade in horticultural products between the United States and Canada has expanded significantly. U.S. and Canadian fruit and vegetable industries, as well as consumers, have benefited from new market opportunities offered by lower tariffs, elimination of import licenses, and the development of a more transparent business environment. Canada today continues to be the top export market for U.S. horticultural products. Likewise, the United States is the main destination for Canadian fruit and vegetable exports. Although the balance of horticultural trade between the two countries continues to favor the United States, the U.S. surplus is narrowing.
U.S. Exports to Canada
Canada remains key market for U.S. horticultural exports; Northern
demand for U.S. fresh produce continues strong
Canada continues to be the leading customer for U.S. exports of horticultural products. Increasing steadily since the U.S./Canada FTA was established in 1987, U.S. horticultural exports to Canada reached a record $3.3 billion in calendar year 2001, almost a third of the value of U.S. global horticultural shipments last year. Fresh fruits, tree nuts, and fresh vegetables comprise nearly half the value of all U.S. horticultural exports to Canada. Citrus, grapes, and strawberries are the leading U.S. fresh fruits demanded by Canadians. Shelled almonds, pecans, and walnuts are the major tree nuts exported. Top U.S. fresh vegetable sales to Canada include lettuce, tomatoes, and potatoes. Shelled almonds, pecans, and walnuts are the major tree nuts exported.
More than 50 percent of Canada’s import demand for fresh fruits and nuts originate in the United States. The Canadian market accounted for 30 percent of the value of U.S. global shipments of fruits in 2001. Chile, Mexico, and Costa Rica are the major competitors to U.S. fruits going to Canada, although with much smaller import market shares. On the other hand, U.S. tree nuts exports to Canada were valued at practically $110 million last year, or 10 percent of the global value of U.S. tree nut exports. Almonds, pecans, and walnuts combined account for around 60 percent of all U.S. nut shipments to Canada.
Canada is the largest market for U.S. fresh vegetable exports. In 2001, with a value of nearly $900 million, Canada imported more than 70 percent of U.S. global vegetable exports. Moreover, the United States supplies about 80 percent of the Canadian fresh vegetable import market. Lettuce, with nearly a 20-percent share, is the top U.S. vegetable exported to Canada. Fresh tomatoes and potatoes follow, accounting for 15 percent and 10 percent of all vegetable sales to Canada, respectively.
years of increases, U.S. wine exports to Canada decreased in 2001
Canada is the United States second largest market for
wine and wine products. In 2001, U.S. wine exports to Canada were valued at $95
million, about 20 percent of global exports and almost twice the value
exported in 1993, just before NAFTA implementation.
The reduction in tariffs, due to NAFTA, has been crucial in keeping
exports to Canada up in the face of a strengthening U.S. dollar and increasing
competition from both traditional European regions and new world wines from
Australia, Chile, and Argentina.
the zero tariff levels under NAFTA, several barriers within the market exist
that continue to hinder trade. Some
of these include; cost-of service mark-ups, discriminatory marketing
regulations, warehousing and delivery requirements, and bottle size
restrictions. In addition, a new plan to manage alcoholic beverage purchases
in Quebec, a major wine consuming province, is being implemented and reviewed
and could result in increased costs to U.S. suppliers.
Nevertheless, the USDA’s Market Access Program has contributed to the long-term export growth of U.S. wines in the Canadian market. Wine export promotion programs have focused on California, through the California Wine Institute; Oregon and Washington, through the Northwest Wine Promotion Coalition; and New York through the New York Wine and Grape Foundation.
U.S. Imports from Canada
imports of Canadian fruits and vegetables continue to rise; processed products
remain the lead horticultural group.
The United States buys more than 70 percent of Canada’s
global exports of horticultural products.
Processed fruits and vegetables are the main products shipped to the
United States, accounting for about 30 percent of the value of all U.S.
horticultural imports from Canada. For
example, U.S. frozen vegetable imports from Canada have tripled since 1994.
Total U.S. imports of Canadian frozen vegetables were valued at more
than $430 million in 2001. Frozen
potato fries are the leading frozen vegetable item the United States imports
from Canada. U.S. imports of Canadian frozen potato fries have increased
steadily since 1994, reaching a record $382 million in 2001.
Nevertheless, bilateral trade in potatoes and potato products between
the United States and Canada continues to be marked by several sensitive
Likewise, U.S. imports of canned vegetables from Canada were valued at nearly $90 million in 2001, 7 times the value imported prior to 1994. After Canada, Mexico and Brazil supply most of the U.S. demand for imported processed fruits and vegetables.
U.S. horticultural trade surplus with Canada is narrowing
While U.S. and Canada horticultural trade has
increased substantially, the United States has maintained a surplus.
However, the U.S. horticultural trade surplus with Canada is narrowing.
In 2001, the U.S. horticultural surplus with Canada totaled $1.1
billion compared to $1.7 billion registered in 1993, the year prior to NAFTA
implementation. A stronger U.S.
dollar vis-à-vis the Canadian dollar has been in part accountable for the
diminishing trend in the value of the trade surplus the United States has with
Nevertheless, viewed in relative terms, the United States continues to maintain a very strong position in Canada. Canada, with a population of about 32 million people, and a current average per capita GDP of approximately $25,000, imported $105.48 per capita of U.S. horticultural products in 2001. The same year, the United States, with a population of nearly 280 million people and a per capita GDP of over $36,000, posted per capita imports of horticultural products from Canada of $8.07.
Some U.S.-Canada Trade Issues
Canada’s restrictions on bulk imports
Canada’s regulations prohibit bulk shipments of some fresh fruits and vegetables under certain circumstances. The regulation applies to both imported and domestic produce. The Canadian Food Inspection Agency, however, grants waivers (also known as “ministerial exemptions”) for bulk imports when local supplies are insufficient to meet domestic fresh or processing demand.
The U.S. potato industry has expressed its concern for years concerning Canada’s bulk limitations. Nevertheless, Canada remains an important market for U.S. fresh potatoes, with exports valued at $72 million in 2001.
Recently, the New York apple industry also raised the issue of Canadian bulk restrictions. For apples, however, U.S. growers from New York have reportedly not had problems shipping golden apple varieties to Canada. This is principally due to the fact that the Canadians do not grow a lot of the golden varieties. However, over the years, apple growers from New York have had problems getting red apple varieties into Canada, primarily during times when supplies of red varieties in Canada are plentiful. Overall, there has never been reported an instance of a ministerial bulk exemption being denied during times when supplies of red apple varieties or any other fresh products in Canada were short.
tomato trade disputes
Fresh vegetable trade between Canada and the United Sates has faced many challenges. Regarding tomato trade, both sides have recently been involved in anti-dumping cases, which were resolved. On March 28, 2001, several U.S. hothouse tomato-producing firms jointly filed with the U.S. International Trade Administration (ITA) an anti-dumping petition against Canadian hothouse tomatoes. The U.S. industry alleged that greenhouse tomatoes from Canada were being sold in the United Sates at less than fair value. On February 20, 2002, the ITA announced its final determination that Canada sold their product below fair value in the U.S. market. Final anti-dumping margins, from 1.53 percent to 18.21 percent, were imposed on Canadian hothouse tomatoes going to the United States. However, on April 2, 2002, the U.S. International Trade Commission issued a final negative determination on the issue of injury to the U.S. industry from imports of greenhouse tomatoes from Canada. This negative determination effectively terminated the case against the Canadian product.
For its part, in response to
the U.S. antidumping complaint, the Canadian Tomato Trade Alliance filed a
complaint against imports of U.S. field tomatoes on June 28, 2001.
The industry group alleged the United States was dumping field tomatoes
in the Canadian market and, as such, damaging its domestic industry.
On November 9, 2001, the Canada Customs and Revenue Agency (CCRA)
initiated an antidumping investigation against U.S. fresh field tomatoes
(mostly from Florida and California) going to the Canadian fresh market. On March 25, 2002, CCRA announced provisional duties of up to
71 percent on imports of fresh tomatoes from the United States, excluding
tomatoes for processing.
On June 26, 2002, the Canadian
International Trade Tribunal issued its finding that the dumping of fresh
tomatoes from the United States had not caused material injury to the domestic
industry. This negative
determination brought the case to a close.
U.S. exports of fresh tomatoes, mostly field grown, to Canada in 2001 were valued at $108 million, down 5 percent from 2000. U.S. imports of greenhouse tomatoes from Canada in calendar year 2001 totaled 58,524 metric tons valued at $96 million, up 21 percent in volume and 23 percent in value. U.S. imports of Canadian greenhouse tomatoes represent 52 percent of total greenhouse tomatoes imported into the United States during this period.
information, contact Samuel Rosa at (202) 720-6086 or Samuel.Rosa@fas.usda.gov)