The proposed Trans-Pacific Partnership and how U.S. long-grain rice would fare under it has been the subject of scrutiny. With Asian rice being handed unfair advantages under the agreement, many in the rice sector chain have expressed concern about a potential downturn in U.S. imports into the Mexican market.
And heading into the TPP debate the foundational issues of those concerns are often not properly understood says Dwight Roberts, head of the U.S. Rice Producers Association.
“In 2008, we had very high commodity prices. For rice, paddy prices FOB New Orleans were $600 a ton while they’re $250 now. It wasn’t just rice prices that were high – all commodity prices were.
“When that occurred, many countries reduced tariff to zero on everything. That’s when the phrase ‘food security’ became hot. You know ‘a country must have a food security program’ or ‘we’re reviewing and updating our food security program.’”
Go back just a bit further to the end of November 2007, “and India announced they’d cut off exports of rice. The world reacted ‘who will replace those 7 million tons in the world market?’ The market then went berserk and stayed very strong for a year.”
As with other countries, Mexico reduced all tariffs on food. Then, when market conditions normalized, “they immediately put tariffs back on corn, coffee, citrus – but not on rice. As long as the price spread between Asia and the Western Hemisphere is such, and you add freight on, it isn’t attractive to buyers.
“A few years ago, Thailand had a huge political disaster in their rice sector. They had folks campaigning and promising producers high prices. That led to overproduction in Thailand. Vietnam also had huge crops.”
All of that, combined with zero tariffs, meant a lot of Asian rice came into Mexico, displacing U.S. rice. “After it reached a certain level and folks started taking more and more notice. The loyal buyers of U.S. rice – including the Mexican Rice Council -- became upset along with Mexican producer groups.
“We went to bat for them, wrote letters and helped lobby officials on how detrimental this was to the Mexican rice industry, to the whole spirit of NAFTA. I mean, come on, duty free for Vietnamese rice?”
After the lobbying effort Mexican officials returned the import tax to 20 percent on Vietnamese rice. “That went into effect on Jan. 9, 2015, and greatly slowed the flow of Vietnamese and Thai rice.”
Asked in writing how the TPP would affect the Mexican rice industry, Ricardo Mendoza Mondragon, Director General of the Mexican Rice Council, said the deal “represents a big risk for rice production in Mexico, since the income of rice from Vietnam to price below quoted in the international market causes prices paid to Mexican producer go to low, although this low price isn’t necessarily reflecting the consumer.
“On the other hand, the entry into operation of TPP will cause Mexican imports from the United States to be reduced and (an) Asian increase, initially in polished rice and later in paddy rice, leaving the United States with a minority share of the Mexican market rice. An example of this occurred when even rice tariffs were not refunded in Mexico, imports from Vietnam and Thailand shot up and down in the United States. … Keep in mind that today there are other countries exporting rice to Mexico, such as Uruguay and Argentina, which may represent a competitor to the United States…"
“The TPP represents a risk to the relationship between the United States and Mexico in rice, precisely because the United States would be displaced in the Mexican market, weakening the supplier-buyer relationship.”
What if the TPP deal isn’t signed? Mondragon: “The United States would have to strengthen its competitiveness as a supplier in the Mexican market, because of the threat that other South American countries represent. This competitiveness will be reflected in better price and quality, especially in paddy rice which is the largest volume of rice trade between Mexico and the United States. Similarly, the rice industry in Mexico could establish agreements with farmers and the U.S. rice sector to establish agreements allowing continued work together.”
How much Asian rice actually hit Mexican shores during the zero tariff period? Roberts asked the Mexican Rice Council for the statistics gathered by the Mexican federal government on rice imports.
“I wanted to know what their imports from anywhere looked like when there was no duty and then what happened when the duty went into effect on Asian rice.”
The numbers, says Roberts, “were rather shocking. In 2014, it turned out Mexico imported 15,000 tons of Vietnamese rice in June. A month later, the number was 11,000 tons. In August, it was 8,500 tons followed by 11,000 tons in September. Thai rice imports ranged from a few hundred tons to 7,000 tons, some months.
“So, we’ve had the experience in the West with this. There have been recent studies done on unfair practices in Vietnam, Thailand and other Asian countries. The (USA Rice) Federation with the U.S. International Trade Commission to produce a very good study titled ‘Can the United States compete in the current world rice market.’ It lays out all sorts of data about unfair subsidies, trade practices and environmental issues in those countries.”
Once the tariff was back in place in Mexico, it wasn’t long before the TPP debate began. “Let’s face it: we live in a world full of free trade agreements. Even with the 12 countries included in the TPP, the access to the Japanese market is very insignificant in terms of volume – you’re talking a couple of extra boats a year, a few truckloads.
“Our immediate reaction to learning of the TPP was ‘Whoa! Vietnam and Mexico are in this? We’ve already had this experience recently on what it was like to have zero duties in Mexico for Asian rice. This isn’t a theory; it’s already been proven that isn’t a good thing for U.S. rice.’ Again, just look at the numbers.”
The TPP, says Roberts, “would threaten everything. The U.S. has a trade agreement to Peru and we can ship duty-free rice there. Well, Peru would be in the TPP and they’re situated on the West Coast, able to take in Asian rice.
“If you’re a long-grain rice farmer in the Mississippi Delta, the TPP isn’t a good deal for you. We went strongly on record and met with (the U.S. Trade Representative) as early as February of 2015 about this.
Is there any traction with the Mid-South congressional delegations regarding this?
“Yes, we’ve informed them, absolutely. (Arkansas Sen. John) Boozman and (Rep.) Rick Crawford are well aware of it. Many of them are sympathetic to our concerns.
“It’s a wild time being an election year. Many of the Republicans are already leery of the TPP because it’s being pushed by a Democratic White House. I’d say if Trump has his way – or Sanders, for that matter – TPP won’t go through.”
USRPA producers “are very worried” about TPP, said Roberts. “We understand that in trade agreements there are always winners and losers. The problem is U.S. long-grain rice producers haven’t gotten a lot of additional access to markets in previous agreements. Producers are just tired of being left out.”