By Chris Connell :: July 2, 2020
Rumors to the contrary, that came with the signing of the Phase 1 Agreement between Peoples Republic of China and the United States of America mid-January, tensions still exists between the two countries.
There are a number of industries particularly hard-hit from a perishable export point of view. We’ll skip large scale soybean purchases which have been promoted by both sides to try to move things along. China has added a new dimension to the disagreement, cancelling some of those promised purchases in a row over the US position on Hong Kong’s independence. For American seafood, the imposition of the first 25% and then additional duties of 35% have led to an over 50% drop in trade. Chinese consumers looked elsewhere for less expensive and yet comparable options. The gaps seemed to be filled by duty-free Canadian lobsters, but upset over the claim of COVID in a fish market from imported seafood has slowed those exports as well. Australia, who are having their own issues with China, are exporting competing rock lobster which carries no import duty. Pork and Dairy exports into China seem to be finding a similar path with the difference that government subsidies are being provided by the PRC. Tensions between Canada and China have intensified as result of the holding of Huawei executive in Canada followed by China detaining two Canadians. Early May China temporarily suspended export permits for Quebec producers in what looks to be a counter move to Canada arresting Huawei chief financial officer in December. Food Importers in China are continuing to searching the global for alternative sources from other parts of Asia, Latin America and Africa.
During the summer months, North American cherry and berry growers had seen high demand for blueberries as well as those highly sought-after Bing and Rainier cherries. Similar to live seafood, these products from the USA have been a casualty of the trade war. The Chinese government slightly reduced the import duty on American cherries by 7.5% – but that took it from 60% down to 52.5%. USA exporters continue to look for overseas market opportunities, finding little in 2020 and are selling record amounts into the US domestic market. This should be a net win for Canada but the size of the crop or available volumes will be less due to the combination of this year’s weather and traditionally smaller acreage verse USA growers. It’s not all about the duties. Last moment testing from the COBID-19 allegation on imported seafood created backlogs for clearing fruit at many airports in mainland China. We seemed to have worked through that situation but many grower/packer/shippers have found it less risky to do business with like-minded countries due to a short crop/supply in the near term.
COVID-19 and an election year have proven to be a tough combination. Despite the political speak that China is buying, the reality is that little will likely happen between now and November to improve market access. Regardless of the outcome of the USA election, there are few indicators of what off-ramp is available to negotiators on both sides, to claim victory for their respective governments. If something were to happen, it would likely be a staged rollback in punitive duties that at the end of the day served no purpose. Unless something happens, no behaviors were changed and no relationships between the two trading partners were improved.