Fair use for educational/research purposes only!

U.S. Farmers' Fears Growing

Trade: Groups are seeking protections amid concerns about a glut of cheap fruits and vegetables.

By EVELYN IRITANI TIMES STAFF WRITER

August 8 2001

SALINAS -- Early in his career, Richard Uchida heard Chinese farmers were starting to grow broccoli, celery and lettuce. "Give them 10 or 15 years," thought the young California vegetable broker, "they could be tough competitors."

Uchida didn't have to wait that long.

It has been only four years, but Uchida and other California producers and exporters are scrambling to hang on to their markets in Asia, where a glut of cheap Chinese fruit and vegetables is giving them a run for the money. Once gleeful about the profits to be made from helping to feed 1.3 billion Chinese, farmers from California's lush San Joaquin Valley to the apple orchards of eastern Washington now worry they will be overwhelmed by China's growing power, particularly once it enters the World Trade Organization.

"America has badly underestimated the resolve of the Chinese," said Uchida, director of international sales at Tanimura & Antle, one of the nation's leading exporters of fresh vegetables to Asia. "We took them for granted and now they're flexing their muscle."

Americans, who depend on Asian consumers to buy 38% of their $51 billion a year in agriculture exports, aren't the only ones worried. A steep rise in Japanese imports of Chinese spring onions, shiitake mushrooms and rushes for tatami mats triggered alarm among politically important Japanese farmers already suffering from the slowing economy. Japan recently imposed restrictions on those Chinese farm products, sparking retaliatory tariffs from angry officials in Beijing.

U.S. government officials eager to get China into the WTO have tried to steer clear of the looming trade battles, choosing instead to focus on the opportunities that could be created if the United States gains greater access to that long-protected market. They predict China's farm imports could increase by $1.5 billion a year once it joins the Geneva-based trade group.

U.S. farmers traditionally have supported free trade because of their dependency on exports. But with the strong dollar making it tougher to sell abroad, they are starting to have second thoughts about unleashing China's capitalist urges. Leading farm groups have told the White House they will not support new trade initiatives unless the U.S. agrees to keep controversial dumping penalties designed to protect domestic industries.

"Our constituents are starting to question the value of some of these trade agreements," said Kraig Naasz, president of the U.S. Apple Commission, whose members have lost a significant chunk of their market in Asia to low-cost Chinese competition.

Just how far China has come is one of the great accomplishments in the realm of agriculture. The vast majority of China's population still is working the land and their incomes lag far behind their urban neighbors. Farmers have suffered from a shortage of water and energy. But in the less than a decade since the government lifted its heavy hand from farmers, China has become the world's leading producer of fruits and vegetables. China grows seven times the amount of vegetables and twice as much fruit as the U.S.

China Already Taking Chunks of Asian Market

This growth was accomplished by having Chinese farmers drop less-profitable grains in favor of high-value export crops. It is in labor-intensive crops such as tree fruit and specialty vegetables where China has the greatest competitive advantage.

In apples, China's production jumped from 4 million tons in 1990 to a whopping 22.9 million tons in 2000. In pears, production over that same period expanded from 2.5 million tons to 8.6 million tons. Last year, exports of Chinese broccoli to Japan soared to 9,000 tons from just 2,265 tons the previous year while exports of U.S. broccoli, primarily from California, declined from 87,603 tons to 70,000 tons,

California, the nation's leading farm state, ships 20% of its produce overseas. But more than fruit and vegetables are involved in these trade skirmishes. After years of browbeating by the U.S., Japan reluctantly began importing California rice, annually purchasing about 300,000 metric tons, much of the state's crop. But that privileged position has been threatened by China's growing role in the international market in the last five years. "They are becoming a more serious threat in some of our high-value markets," said Tim Johnson, president of the California Rice Commission.

So U.S. farmers find themselves in the uncomfortable position of trying to balance future profits from increased access to China's still-nascent market against immediate losses as they compete elsewhere.

A particular concern is Taiwan, where U.S. producers have enjoyed special access. Taiwan bans most imports from the mainland, but if China and Taiwan both join the WTO, as expected, officials in Taipei will be forced to drop their barriers to Chinese products.

"China is already taking sizable chunks of the Asian market and the U.S. is the major loser," said Desmond O'Rourke, president of Belrose Inc., an agricultural consulting firm. "Should Taiwan open up to China under WTO, Washington could lose a 4-million-box market" in apples.

Farmers need look no further than other trade disputes to have their worst fears confirmed. U.S. producers of garlic, canned mushrooms and crawfish have filed complaints against China in recent years, alleging products were sold below the production costs, a practice known as dumping.

Seven years ago, Chinese garlic exports to the U.S. jumped from 3 million to 64 million pounds in one year and prices collapsed. After an outcry by U.S. growers, the government imposed a 376% dumping duty on all Chinese garlic, which effectively priced the country out of the market.

"China just came in and blew everybody away," said Don Christopher, president of Christopher Farms, who has lost his export markets in Europe, Japan and Australia to Chinese competition. Though he still remains California's largest garlic producer with 4,600 acres, he gradually is reducing his acreage and increasing his imports. He now buys 10% to 15% of his product abroad and predicts that will rise to 50% in the coming years.

"I just hope we never get kicked out completely," he said.

China's swift ascent caught many in the West off guard because its farmers lacked modern storage facilities and transportation. As much as one-third of its crop never made it to market. But Frederick Crook, a Washington-based China agriculture specialist, said China's farmers have benefited from low labor costs, expanded agriculture research and subsidized land. U.S. farmers complain those benefits and other help from the government mean they are fighting with one hand tied behind their backs.

"People say, 'Hey, this is some kind of Communist plot,' " said Crook, who was a China specialist for the U.S. Foreign Agriculture Service before starting his own consulting practice. "This is no plot at all. This is just a bunch of hard-working Chinese farmers saying, 'Hey, I can raise some garlic, ship it to the U.S. and make some money.' "

Markets Dry Up for California Grower

As the operator of California's second-largest farm and processing operation, Tanimura & Antle must contend with land prices as high as $35,000 an acre, skyrocketing energy, fertilizer and water costs and a work force of 2,700 whose lowest-paid harvesters average $12 an hour plus benefits. Though much of China's tilling and harvesting are done by hand, the average worker makes less than $2 a day, and energy and water costs are a fraction of those in the U.S.

About two years ago, Tanimura's brokers began noticing a steady increase in exports of Chinese vegetables to Japan. Not only was the Chinese produce being offered at 25% to 30% less than the market price, but the quality was good enough to satisfy the Japanese, who had grown more frugal as the economy worsened. Much of the Chinese imports were coming from farms established by Japanese trading companies, which provided the seed, the growing expertise and the transportation.

Since then, the California firm's shipments of broccoli into Japan have been "substantially reduced" and exports of celery to the mainland--which until recently filled up to 15 shipping containers a week--have dried up completely.

George Tanimura, co-founder of Tanimura & Antle, hopes that when the Japanese economy improves, its safety-conscious population will return to U.S. produce, which is grown under stricter health and safety standards than those found in most of China. Decades in Asia also have given the company such strong brand appeal that Japanese tourists regularly visit the company's picturesque headquarters outside of Salinas.

But Tanimura, a second-generation Japanese American who survived the Great Depression and a World War II internment camp, is anticipating a fierce battle.

"We can't just cry about it, we've got to do something," said the feisty 76-year-old, whose grueling work schedule includes early-morning visits to the fields and trips to operations in Arizona and Mexico. He is exploring the prospects for growing asparagus, which is developing a following in Asia. "We've got to find a new business because of China," he said.

China didn't always inspire such trepidation. In 1994, jubilant apple growers were the first in the U.S. to get their product approved for sale to China, a market expected to buy at least 1 million boxes of fruit a year. But China imposed a 30% duty and restricted the U.S. to exporting less popular Red and Golden Delicious apples. U.S. sales never have amounted to more than 500,000 boxes.

While U.S. apple growers struggled to get their fruit into China, farmers there were feverishly expanding their production of the Fuji and Gala apples favored by much of Asia. By offering lower prices and quicker delivery times, China, which exports just the top 1% of its apple crop, has squeezed the U.S. out of many Asian markets, particularly Singapore and Hong Kong.

Washington, which produces more than half of America's apples, has borne the brunt of the global glut. Grant Daniel, a Santa Barbara native who farms 70 acres along the banks of the Columbia River in eastern Washington, is bracing for a third season of debt. He said it costs him $110 to produce a carton of Fuji apples that sells for $85. This year, he will be receiving a federal market loss assistance check, the first to be distributed to the apple industry. Those checks average $14,000 for each grower.

"When China comes here, the prices are going to be so cheap that there's no way we can compete," said Daniel, the father of seven, who has borrowed against his farm to pay his bills. "All your costs are local but your prices are global."

As a second-generation apple grower whose family has been exporting fruit for 50 years, William Buak of Watsonville insists he favors open trade. But he agrees with other farmers who say the U.S. government needs to protect its own unless it wants to be totally dependent on foreigners for its food supply.

Six months ago, Buak put his 160-acre orchard on the market, joining the 183 other Californians who have pulled out of the apple business in the last five years. Like his grandfather, who left Yugoslavia to chase a dream in a developing country known as America, he is convinced the future lies thousands of miles away from his idyllic hilltop home east of Monterey Bay.

"If I was a young man today, China is where I would go," he said. "I'd put in a packing house and cold storage. There's a load of opportunities over there."

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

ABOUT THIS SERIES

This is one of an occasional series on the impact of China's entry into the World Trade Organization. It will examine social and political issues in California and China, as well as key industries such as agriculture and telecommunications.

Previous: China's impending WTO entry will mean greater clout, golden opportunities--and loss of millions of jobs.

Previous: California growers worry about how to earn a profit while doing business in China. Meanwhile, Chinese farmers worry they will have difficulty competing with foreign growers.

Previous: The telecommunications industry is like the canary in the mine shaft, an early warning system for whether China can carry out changes the international community demands as the price of admission to the WTO.

Today: Once gleeful about the profits to be made from helping feed 1.3 billion Chinese, farmers from California's lush San Joaquin Valley to the apple orchards of eastern Washington now worry they will be overwhelmed by China's growing power, particularly once it enters the World Trade Organization.

http://latimes.com/business/la-000064362aug08.story?coll=la%2Dheadlines%2Dbusiness

-- Martin Thompson (mthom1927@aol.com), August 10, 2001

Answers

Good stuff, Martin. I wasn't even aware of this. I would have thought that, with China's desperate water situation, this would be impossible. But, I guess most of their drougt is in the North of China, while it is the South of that country that is the big farming producer.

-- JackW (jpayne@webtv.net), August 10, 2001.

Woops! While I was typing the above my whole house started to rock and roll. An earthquake, 5.1 on the Richter, epicenter about 70 miles from my home in Paradise, Ca.

Ugghhh! What else can happen to California?

-- JackW (jpayne@webtv.net), August 10, 2001.