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ARCHIVES

Anything but ‘free’ trade

By Bob Cummings
Senior VP
USA Rice Federation
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As the global economy attempts to recover from the worst recession in a generation, U.S. economists are beginning to report a hint of light at the end of the economic tunnel – particularly for the more buoyant economies of Asia, including China, Japan and South Korea. But while Asian econo-mies are expected to grow by nearly six percent in the next year, the U.S. economy will grow by a paltry 1.5 percent, according to the International Monetary Fund. And protectionist trade policies practiced by Japan, Taiwan and South Korea in agriculture are hampering the American economic recovery by restricting rice exports and free-market trade.

Despite Japan’s Uruguay Round commitments, U.S. rice does not have meaningful market access in Japan. Rice imports, controlled by the Japan Food Department, are managed through periodic import tenders and by imports through what is referred to as the simultaneous-buy-sell system. As a result of these practices, U.S. rice imports are destined almost exclusively for government stocks or are re-exported as food aid – effectively shutting out the high value retail or “table market” for U.S. rice. Access to all consuming segments of Japan’s rice market is critical to sustaining U.S. rice exports to Japan. U.S. rice exporters want to meet Japanese market demand and that means having access to all rice users.

Taiwan/Korea must meet WTO obligations
Under a 2007 agreement with members of the World Trade Organization (WTO), including the United States, Taiwan established an annual tariff rate quota for rice of 144,720 MT (brown rice basis). Of this amount, 50,652 MT was to be imported annually by the Taiwan private sector and 94,068 MT was to be imported by Taiwan authorities as country-specific quotas to the United States, Australia, Thailand and Egypt.

Taiwan sets an import price ceiling for public sector rice imports that effectively allows import authorities to reject competitive tender offers and force bidders into price negotiation. This requirement forces U.S. bidders to lower their competitive bids in order to win tenders and significantly delays Taiwan’s purchases. For the second year in a row, Taiwan has failed to import its minimum access quota of U.S. rice, claiming that the bids exceed Taiwan’s ceiling price. Taiwan must meet its WTO obligations.

South Korea, through negotiation with the United States and other WTO members in 2005, retained a special WTO exemption through 2014 to control rice imports tightly. As part of this exemption, the United States obtained a country-specific import quota for U.S. origin rice.

In 2009, Korean authorities and rice importers informed the U.S. government and USA Rice that Korea would not be able to fulfill its obligations to make a certain portion of rice imports from the United States available to the table or retail market, despite the fact that Korea is required to place an allocation of rice imports from the United States onto the table market each year – a potentially serious breach of the agreement. To add insult to injury, at Korea’s insistence, rice was omitted from the proposed Korea FTA, still to be considered by Congress. USA Rice believes that free trade with Korea should be open to all products and segments, including rice.

U.S. rice sales below pre-2006 levels in the EU
Media attention follows the President’s international travels, but rice protectionism isn’t restricted to Asia. Exporters of U.S. rice to the EU continue to struggle with burdensome mandated testing requirements by the European Commission in the wake of the Liberty Link 601 genetically engineered rice incident of 2006. Despite three years of progress and success by the U.S. industry to remove the Liberty Link trait from the supply, EU regulations and consumer aversion have left U.S. rice sales to this key market well below pre-2006 levels.

As this article went to press, our industry was fighting another trade restriction in Mexico. In mid-November, Mexican health officials required the testing of U.S. milled rice originating from three U.S. suppliers for the presence of unspecified genetically engineered traits and micotoxins. Mexico has provided no evidence of legitimate health concerns about U.S. rice, and the USA Rice Federation and the U.S. government are pressing Mexico to lift these testing requirements.

As the United States looks to economic recovery, one meaningful way to move forward is to narrow the burgeoning trade deficit, and U.S. agriculture, with rice farmers at the forefront, is the premier U.S. export competitor. One way to level the playing field between the booming economies of Asian nations and protectionist tendencies in other key markets and the United States is for the Obama Administration to address the trade-distorting practices that face U.S. rice across the globe so that U.S. rice farmers, and the U.S. economy, can benefit.

For more about USA rice programs, visit www.usarice.com.

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