U.S. trade officials are in the thick of negotiating two major trade agreements. Both, according to Carl Brothers, Riceland Foods senior vice president of marketing and risk management, “are difficult.”
Brothers, spoke about the Trans Pacific Partnership (TPP) and the Transatlantic Investment and Trade Partnership (TTIP) at the recent University of Arkansas’ 2014 Rice Expo in Stuttgart.
“Already, we’re having trouble with countries wanting to … have special privilege with rice. The (U.S. rice) industry is standing hard and tall saying, ‘we can’t let this happen again. We were left out of the (trade deal with) Korea.’ So the industry is putting lots of political pressure on to keep that from happening.”
A related issue has been the inability of President Obama to get authority for trade agreements to be voted up or down. “If you bring an agreement back and don’t have that authority, you know Congress will begin to say, ‘We’ll accept this but never that.’ And we’ll never get a trade agreement.
“So, trade promotion authority will come up at some point. The President will have to have it if we’re to have any agreements worth consideration.”
There are 11 countries involved in the TPP: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam.
“The only one that really holds promise for rice at the moment, above and beyond what we’re doing today, is Japan. We did get to ship rice to Japan in 1995. … What we’re wishing for, really demanding, in the new round is greater access which means more tonnage. We’re not saying how much tonnage because no one has shown their hand just yet.
“The other issue with Japan is improved quality of access. Currently, the Ministry of Agriculture, Forestry and Fisheries stays in between U.S. trade in Japan and (consumers). In fact, most of the U.S. rice that goes into Japan -- all of it currently being shipped out of California -- never reaches the table. It’s either going to food aid programs or for industrial purposes.”
TTIP, meanwhile, is a trade agreement with the European Union. “We’ve had all types of difficulties with the European Union starting in 2006 when we found a problem with GMO in rice. We have not shipped any large tonnage of rice since. We’re now getting a little rice in but it’s a fraction of what we were shipping prior to the (GMO) event.
“The European market is just an absolute mess with all the different trade policies. There are so many different trade policies that it’s hard even figure out where you’re at.”
Brothers would like to see that cleaned up and “have a full elimination of tariffs on rough, milled and brown rice. That’s going to be a big hurdle again. Rice will be sensitive in Europe because of the southern production, particularly in Italy. There is also some grown in France and Spain.
“I don’t know why they fight us so hard because mostly they produce medium-grain rice. Most of the rice we ship to the northern European markets is long-grain out of the southern United States. South Europe is mostly medium-grain consumers. But my argument has largely fallen on deaf ears and they continue to strongly protect their rice industry.”
The Europeans have a problem, though. “A few years ago, they introduced something called ‘Everything but Arms.’ That allows any lesser-developed country to come into Europe duty-free. If you read the press, the Italians are really beginning to fuss about this because it’s harmed their business. We need to go in there duty-free, as well.”
In these negotiations, the United States also needs to get a low-level presence policy for GMO, Brothers insisted. The EU community is concerned about importing U.S. rice “because if even one (GMO) kernel happens to be found they could be in a recall situation and could cost them tremendous money. They don’t want to take that risk. We have to solve that risk someway and the way to do that is a low-level presence policy.”
Brothers ended his talk on a high note, nodding towards the Colombia TRQ (tariff-rate quota). “Sometimes trade agreements really are successful and this is one of the bigger successes of late. If you go back to the start of the trade agreement, Colombia had an 80 percent tariff on rice entering the country. That was prohibitive for us and no U.S. rice was going into the Colombian market.
The U.S. Trade Representative negotiated an agreement to reduce that 80 percent tariff over time. “The truth is Colombians fought back against that. They said rice was sensitive and didn’t want to reduce that tariff for the first six years of the agreement and then take it down, literally, over the remaining 13-year phase out. Under that condition, we’d ship very little rice into Colombia.”
Even so, USTR was able to secure a TRQ, “where we could go in duty-free for a certain amount of tonnage. It started out in 2012 at 79,000 tons. That number increases 4.5 percent a year until the tariffs are phased out entirely and it’s a free market.”
The good news is that not only has the United States shipped the rice but “we’ve also formed an organization called COL-RICE with the government. So, we can auction off the rice for the TRQ. Without a TRQ certificate bought from COL-RICE, you can’t get rice into the country duty-free.”
The TRQ rights generate about $12 million a year in revenue. Half of that goes back to the Colombians.
“The other half, and I was pleased to see it happen, our industry agreed to give to research. The way it works is the six rice-producing states get a pro-rata share (of the $6 million) based on their rice production. That means that this year about 50 percent of that will come back to Arkansas.”