The confirmation of Ron Kirk as the new U.S. Trade Representative on March 18, 2009, is an opportunity for the Obama administration to refocus the U.S. trade agenda. Aggressive enforcement of existing trade agreements must be a priority along with congressional approval of the free trade agreements with Panama and Colombia, and completion of the Doha Round of multilateral negotiations.
With the current state of the economy, trade is as important a factor in economic recovery as any other. In particular, agriculture remains one of the only sectors to enjoy a surplus of exports over imports, and rice sales to foreign customers are an important contributor to that. The U.S. rice industry exports nearly half of the rice crop annually, so trade is critical to the future health of the industry. Ambassador Kirk’s agenda must include engaging our trading partners and eliminating trade barriers for U.S. agricultural commodities abroad.
In testimony before the Senate Committee on Finance, Ambassador Kirk stressed the importance of enforcing current trade agreements. As the fourth-largest global exporter of rice, the U.S. rice industry faces two specific market access barriers that require the immediate attention of the USTR.
The most pressing concern is Taiwan’s failure to fulfill its World Trade Organization (WTO) obligation to import rice. In March 2007, Taiwan committed to a series of country-specific tariff rate quotas (CSQ) for the annual import of rice by the government. Under these CSQs, Taiwan is obligated to import 64,634 metric tons of U.S. rice on a calendar-year basis. Taiwan fell short in 2007 and 2008 by importing only 46 percent and 36 percent, respectively, of its commitment to the United States.
Taiwan cites high U.S. prices and lack of budget as its reasons for not buying. However, even when U.S. prices were below current levels, Taiwan failed to purchase rice. Taiwan uses a non-transparent price ceiling mechanism that makes it nearly impossible for U.S. rice to be competitive. It is unclear how Taiwanese officials calculate the price ceiling because it does not reflect the commercial realities of the market. The USA Rice Federation has met with Taiwan officials on several occasions to explain market fundamentals. We have also engaged USDA and USTR to seek resolution. It is now time to elevate the U.S. government’s discussion with Taiwan.
Multiple trade barriers also exist with the European Union (EU). Long-grain brown rice dominates U.S. exports to the EU, where it is milled into white rice, packaged and sold to consumers. By WTO obligation, current EU import duties on U.S. brown rice should be zero, but the EU withdrew this trade concession in 2004 and has yet to replace it as required by WTO rules. Instead of paying zero duties, importers of U.S. brown rice now must pay the equivalent of $54.35 per ton.
Compounding the unfair import duty is the EU response to the presence of the LibertyLink Rice 601 (LL601) trait in the U.S. long-grain supply. The LL601 trait is not approved in the EU, and after trace amounts of the trait were found in the commercial U.S. long-grain rice supply in 2006, long-grain rice trade with the EU effectively stopped. In order to regain this market the U.S. rice industry implemented an extensive voluntary testing protocol to rid the long-grain supply of the trait. That protocol, called the Seed Plan, has been very successful, and 99.9 percent of tests on the 2008 crop came up negative for the LL601 trait.
Unfortunately, the effort of the U.S. rice industry has not been enough to lift the EU’s Emergency Measures requiring mandatory origin testing of U.S. long-grain rice before it is exported to the EU. These measures, in place since 2006, should be eliminated because the U.S. rice industry has proven its commitment to meet EU regulations by effectively removing the LL601 trait.
According to USDA data, total 2007 U.S. rice exports to the EU-27 were 98,000 metric tons, a decrease of 53 percent from 2006 levels and 68 percent from 2005. In order for the U.S. to fully recover the market, the EU must adopt a comprehensive low-level presence (LLP) policy that covers food and feed. Currently, the EU has a zero tolerance for genetically engineered traits, like LL601, not yet approved in the EU. The establishment of a LLP policy would allow for a low level presence of GE traits that are approved in other countries, but not in the EU.
The USA Rice Federation has actively worked to reverse trade barriers to U.S. grown rice around the world. Now is the time for Ambassador Kirk to press our trading partners. If enforcement of current trade agreements is Ambassador Kirk’s top priority, the trade barriers unfairly inflicted upon the U.S. rice industry that conflict with existing trade agreements must be pursued vigorously until market access and competitiveness are restored.
Beth A. Park, USA Rice Federation International Policy Manager, contributed to this commentary.