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WORLD TRADE SITUATION AND POLICY UPDATES
Improved Access to Germany's Market For U.S. Wine Achieved
On August 3, meetings between the U.S. Agricultural Office in Bonn and German representatives produced favorable results relating to restrictions on U.S. wines because of fluoride levels. Specifically, the Federal Ministry for Nourishment, Agriculture and Forestry agreed to draft a change to Article 2 of the Wine Import Examination Regulation to accept imported wines, which exceed Germany's fluoride tolerance level of 0.5 ppm, provided they are: (1) accepted in the country of origin; (2) accepted in other EU member states; (3) accepted for import and sale in Germany; (4) pose no health risk; and (5) produced using normal oneological practices with no substances added. The regulatory changes should become effective by December 1998. In the interim, Germany has agreed to grant an exemption, on a case-by-case basis, for U.S. wines which exceed the current German fluoride standard. U.S. wine exports have registered impressive gains in Germany. In CY 1997, shipments were valued at $25 million, up more than 365 percent from 1995.
Germany's fluoride standard is much stricter than the current voluntary international guidelines issued by the Office of Wine and Vine (OIV) and other EU member states. OIV recommends that wines contain no more than 3 ppm of fluoride. Some U.S. wines exceed Germany's tolerance level of 0.5 ppm of fluoride, in part because of fluoride presence in the soil and pesticides, such as cryolite, used against various pests. The United States does not have an established tolerance level for fluoride in wine.
South Africa Lifts Ban on U.S. Table Grapes
On July 27, South Africa agreed to lift the ban on U.S. table grapes imposed on July 16, following successful meetings between FAS, APHIS, and South African officials. However, an entry point inspection will be conducted on table grapes in South Africa for identified quarantine organisms. South Africa is also in the process of notifying the WTO Sanitary and Phytosanitary Committee that it plans to withdraw current published phytosanitary import requirements, for, inter alia, fresh fruits and vegetables. A new Pest Risk Assessment has already begun. South Africa is a small but growing U.S. table grape export market. U.S. table grape exports to South Africa reached $350,000 in Calendar Year 1997, up 83 percent from 1996. The first shipment of U.S. table grapes, this season, is scheduled to arrive in South Africa in a few days.
First Shipment of U.S. Pears Enters Yemen; Efforts to Gain Access For Apples Continue
Following the recent Yemeni government decision to officially open its market to a number of fresh fruits and vegetables, the first shipment of U.S. pears has successfully entered the country, according to trade sources. Yemen is believed to hold significant potential for certain U.S. horticultural products, notably fresh fruit, as direct imports are permitted. Yemeni government officials have indicated that a second tranche of fresh fruit and vegetable products will be liberalized on January 1, 1999, with the market opening completely to all fruits and vegetables by January 1, 2000. While the Yemeni government has postponed the liberalization of apple imports, FAS is continuing efforts to have apples included in the January 1999 liberalization package.
Improved Tomato Quality Increases U.S. Export Potential to Japan
According to the Agricultural Counselor in Tokyo, U.S. shippers and Japanese importers are optimistic about the shipping, handling, and marketing of U.S. fresh tomatoes to Japan after reduced product defect levels were reported. Japanese traders imported both California and Florida tomatoes to supply McDonald's successful 4-week long sales campaign in June. One trader reported that the arrival condition of tomatoes far exceeded the industry's expectation, with only a .06 percent product defect level for one container load and 3.7 percent for another load. Another importer experienced about a 5 percent product defect level on average. In previous shipments product defects were as high as 40 percent, threatening the California Tomato Commission and the Florida Tomato Committee efforts to promote U.S. tomatoes in Japan. The improvement was due, for the most part, to the U.S. industry's development of a single-layer 4-kilogram carton exclusively for the Japanese market. Upon arrival, every carton was individually inspected by importers for quality and color and almost all were in perfect condition.
After many years of attempting to open the Japanese market to U.S. tomatoes, FAS and APHIS, working with the California and Florida tomato industries, succeeded in opening this new market for U.S. tomatoes in April 1997. By working together under the Market Access Program, the two states' industries aim to supply the market year round. The U.S. tomato industry views Japan's food service sector as a significant potential market for U.S. tomatoes, with near term sales prospects estimated at $10-20 million annually.
EU Considering Increased Domestic Support Subsidies for Wine
The European Commission recently approved a proposal to increase the European Union's (EU) massive domestic support subsidies for wine. The proposal was submitted to the European Council (EC), and it is scheduled to be debated in October. If approved by the EC, the proposed budget for annual EU wine subsidies during years 2001-2003 would grow to approximately $1.23 billion ECU ($1.3 billion), almost 50 percent higher than the 806 million ECU ($870 million) budgeted for 1998. The increased subsidies would be used to fund a range of new and old measures, all of which fall into the area of domestic support or structural aids to help restructure the wine sector to become more competitive with third country wines. The proposed increase in wine subsidies is discouraging, given all the international efforts over the past years to reduce trade-distorting support. However, the proposed wine reforms are within the EU's WTO commitments, because they are either domestic support measures, which would be swallowed up in its Aggregate Measurement of Support commitment, or structural reforms, which would be green box measures. The EU's extensive domestic support and export subsidies for wine, together with member state funded market promotion activities, place U.S. wine at a great competitive disadvantage. FAS will continue to monitor the EU wine sector reforms, as well as member state expenditures on market promotion for wines.
United States and EU Begin Negotiating Agenda for New Wine Accord
On July 23, U.S. and EU officials met in Brussels to begin discussing a draft agenda and timetable to negotiate a new bilateral wine accord. Discussions included oenological practices, intellectual property rights, and import certification requirements. The next round of wine talks is scheduled for September 24 and 25 in Washington, D.C. Both parties will try to establish in these meetings if there are enough common areas of concern to begin negotiations.
United States Establishes Dumping Margins on Imported Mushroom Products
On July 27, as part of an ongoing anti-dumping review process, the Department of Commerce's International Trade Administration (ITA) made a determination that imports of certain preserved (mostly canned) mushrooms from China, Chile, India and Indonesia were being dumped into the United States, and assessed preliminary dumping duties as follows: China (168.72 percent to 198.63 percent), Chile (142 percent), India (2.75 percent to 243.87 percent), and Indonesia (11.24 percent to 29.58 percent). The ITA is scheduled to issue its final determinations later this year.
On January 6, 1998, the U.S. mushroom industry had filed a anti-dumping petition with the U.S. International Trade Commission (ITC) alleging that the U.S. industry was being injured, or threatened with injury, from the aforementioned countries. The petition also alleged that the mushrooms were being sold in the U.S. at less than fair market value.
In 1997, U.S. imports of canned mushrooms totaled 59,000 tons valued at $103 million, up 4 percent in volume but down 6 percent in value from the previous year. Prepared and preserved mushrooms (HTS No. 2003100053) accounted for approximately 40 percent of the total volume imported in 1997. China accounts for the largest U.S. import share, with about 50 percent of the total.
HTP Organics Newsletter Now Available on the Internet
To better serve the organics community, HTP recently decided to make their monthly newsletter, Organic Perspectives, available on the Internet. The newsletter contains reports on organics from around the world gleaned from attache reports, trips made by the HTP organics staff, and other sources. Also covered are items of interest about the U.S. national organic program and the domestic organic industry, and as well as a list of upcoming events.
The newsletter can be accessed either through the FAS home page under "World Market and Trade Feature Reports," or at the HTP home page:
http://www.fas.usda.gov/htp/organics/organics.html
Greek Peach Canners Cost/Price Squeeze May Benefit U.S. Exporters
Greek canners will likely have to raise export prices of canned peaches to a level more in line with those of other global competitors this season. The European Union is facing a short canning peach crop this year, estimated at between 230,000 and 285,000 metric tons. This reduced production comes just as a EU- mandated 15-percent increase in the Minimum Grower Price (MGP) is being implemented. This represents the largest increase in the 20-year history of the peach program. Similarly, the 25-percent reduction in the Production Aid (a subsidy to canners) is also the largest downward movement. According to news reports European canners had been expecting a decrease in the Production Aid of nor more than 8.85 percent. The larger reduction in the Production Aid has forced them to press customers for price increases on all new-season shipments to cover the additional cost of production, or for an agreement to cancel all existing contracts that predated July 23.
This year's short crop is the second in a row for Greek canning peach producers. In contrast, the U.S. canning peach harvest has been well above average for the past two years and stock levels are estimated to be greater than normal. The U.S. industry will be counting on exports to reduce supplies and maintain prices. U.S. canned peach exports for the last two marketing years (June-May) totaled 16,000 metric tons ($16 million) and 19,000 metric tons ($18 million), respectively.
U.S.-Mexico Tomato Suspension Agreement is Modified
On August 6, 1998, the Commerce Department and producers/exporters of fresh tomatoes from Mexico signed an amendment to strengthen the existing tomato suspension agreement with Mexico, and expand its coverage to include more of Mexico's growers. On August 14, 1998, Commerce published a Federal Register notice announcing certain modifications to the agreement as follows:
Specifically, the amendments would take account of the seasonal differences between California and Baja California, Mexico versus Florida and Sinaloa. The two production periods of each year would be changed to July 1 to October 22 and October 23 to June 30. The reference price, or floor price, for tomatoes coming into the United States would be lowered to $.172 per pound ($4.30 for a 25 pound box) for the July 1 to October 22 period and the reference price for October 23 to June 30 would be raised to $.2108 per pound ($5.27 for a 25 pound box). One of the main reasons for the change is to increase the number of signatory producer/exporters of tomatoes from Baja, Mexico. The current suspension agreement specifies that Mexican tomatoes entering the United States cannot fall below $5.17 per 25 pound box, or $.21 per pound. The original suspension agreement was signed on October 28, 1996.
U.S. imports of fresh tomatoes from Mexico in CY 1997 totaled 660,609 metric tons ($517 million), down 4 percent from the preceding year's total of 685,678 MT ($580 million). However, through the first five months of 1998, imports totaled 486,416 MT ($363 million), up 12 percent from 1997's level of 434,828 MT ($343 million) for the comparable period.
Strong Marketing Opportunity for U.S. Fresh Lettuce in Japan
According to the U.S. Agricultural Office in Tokyo, fresh crispy-type U.S. iceberg lettuce has a large market opportunity in Japan's food service sector. The demand for fresh lettuce in Japan is rapidly growing, especially in Japan's sandwich/hamburger outlets and family restaurants. Japan cannot produce the U.S. type-iceberg lettuce because of its high-humidity climate. Although Japan's phytosanitary import requirements remain strict, a potentially large, untapped market exists for fresh U.S. lettuce in Japan. Japan's $4.8 billion sandwich/hamburger market, with 6,800 restaurants nationwide, is growing at a rate of 5-7 percent annually. Japan's annual consumption of fresh lettuce is about 530,000 tons. In 1997, Japan imports of U.S. fresh lettuce, mostly retail sector sales for household consumption, totaled only 3,435 tons valued at $3.2 million. During the same period, U.S. exports of fresh lettuce to all destinations totaled 294,374 tons valued at $159 million, up 1 percent in volume and 13 percent in value. The U.S. has been working with the Japanese to improve their import inspection procedures.
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