U.S. rice farmers and millers are close to overcoming one of the final obstacles blocking access to China’s massive import market, but there isn’t much celebrating going on. That’s because the two countries have come to the brink of an all-out trade war and it's looking like rice trade may become just one more casualty.
“After more than a decade of work to achieve U.S.-grown rice access to the enormous Chinese market, we could finally see the finish line, and now a trade war could set us back years,” Betsy Ward, president and CEO of the USA Rice Federation, told Agri-Pulse. “The flip side is that were China to allow U.S.-grown rice in, it would be a first small step to balancing the trade deficit.”
On Monday, China slapped $3 billion worth of tariffs on a list of 128 U.S. products like pork, oranges, cherries, almonds, plums and ethanol. (For the full list of products and tariffs, read this FAS Gain Report here.) This retaliation came on the heels of new U.S. global tariffs on steel and aluminum imports, a small percentage of which come in from China.
Whether the U.S. and China can prevent further escalation is unclear, but it’s looking like it will get worse before it gets better. That’s because the Trump administration didn’t stop with the steel and aluminum tariffs. On March 22, President Donald Trump signed an order to impose about $60 billion in tariffs solely on Chinese goods in order to punish China for years of intellectual property theft and forced technical transfers.
President Donald Trump
China hasn’t yet announced any retaliation for those tariffs, but the U.S. ag sector is bracing for it.
None of these tariffs, whether they are meant to deal with China’s over-production of steel or the country’s theft of intellectual property, have anything to do with rice trade, and it’s still possible that the process of gaining access to the Chinese market may move forward.
U.S. rice farmers have been after China to allow in U.S. rice for more than a decade and it seemed that real progress was finally being made last summer. In July, during the first Comprehensive Economic Dialogue between the two countries in Washington, China finally signed off on the sanitary and phytosanitary protocols needed to allow in U.S. rice.
“This is another great day for U.S. agriculture and, in particular, for our rice growers and millers, who can now look forward to gaining access to the Chinese market,” USDA Secretary Sonny Perdue said at the time. “This market represents an exceptional opportunity today, with enormous potential for growth in the future.”
China consumes about 144 million tons of rice every year and is the world’s largest rice-producing and importing country.
As part of the deal China struck when it joined the World Trade Organization in 2001, the Asian nation agreed to take in at least 2.7 million tons of U.S. rice each year. Still, there has been no trade because of China’s past refusal to approve the protocols.
China, in what was widely expected to be a part of the final phase in lifting its ban on U.S. rice just a few months ago, sent a 10-page questionnaire to USDA’s Animal and Plant Health Inspection Service (APHIS), and then the agency passed copies to the U.S. rice mills that export to China. The mills labored to fill out the dense questionnaires that many felt were far too intrusive, according to rice industry sources. Some of the questions dealt with a mill's export history, records of phytosanitary inspections and inspections of raw materials used by a mill.
Despite the reservations of rice producers, the questionnaires have been mostly completed and they are expected to be turned in to USDA's APHIS soon. After that, it will be up to China to decide whether the process moves forward. Under the best possible scenario, China will scrutinize the responses and then choose some or all of the mills to visit in order to verify that they meet the country's sanitary and phytosanitary standards.
Historically, the U.S. and China have been able to quietly continue conducting what are seen as mostly technical-level talks on issues, unaffected by more splashy, high-stakes political battles, but it’s unclear if that will be the case with rice.
“The question is, can our technical experts continue the quiet relationship or does it all get caught up in the politics of this trade fight?” said one trade official who asked not to be named.
Bobby Hanks, chairman of the USA Rice International Trade Policy Committee and CEO of Supreme Rice LLC, is concerned that rice exports could be a casualty of a trade war.
"Our industry is at the end-game of providing detailed information to Chinese authorities about the approximately 30 facilities registering to ship U.S. milled rice to China," said Hanks. "Efforts to get U.S. rice into China are difficult and complicated, and recent events only increase our challenges."
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