WASHINGTON, July 6, 2016 - Soybean, corn, beef, pork and
dairy producers can mostly agree that the Trans-Pacific
Partnership would be good for business, but that’s not the case for rice
farmers.
What’s good for corn in Illinois is generally good for corn
in Iowa or any other state. But the rice industry is far more segmented.
California farmers, who produce almost exclusively medium and short grain rice,
stand to benefit from TPP provisions that create new market access in Japan,
but long grain farmers in Southern states stand to lose big from new
competition for sales to Mexico.
It’s a situation that leaves the USA Rice Federation, which
represents both California and Southern farmers, in a bind and unable to
declare support or opposition to TPP, the 12-country trade pact among the U.S.,
Japan, Mexico, Vietnam, Chile, Peru, Singapore, Canada, Australia, New Zealand,
Brunei and Malaysia.
Studies predict the TPP would produce billions of dollars in
new farm income from increased exports. But when it comes to rice, the picture
is far less clear. The only rice Japan buys from the U.S. is the medium grain variety
from California, and U.S. negotiators carved out what could be a lucrative deal
for Golden State growers. Japan agreed in the TPP deal to several measures
including a 50,000-ton duty-free quota for U.S. rice that would rise to 70,000
tons in 13 years, according to a USDA analysis.
Meanwhile, Mexico buys mostly long grain rice from Southern
farmers in states like Arkansas and Louisiana, and a separate TPP provision is
expected to cut into that trade, according to USA Rice officials.
Vietnam, a major global rice exporter, currently doesn’t
sell to Mexico because of a 20 percent tariff that doesn’t apply to U.S.
shipments. It’s an arrangement that assures that the U.S. keeps its market
share in Mexico, but a TPP provision would change all of that.
Mexico agreed during TPP negotiations to gradually lift the
tariff on Vietnam, and that will hurt U.S. exporters, according to an analysis by the
U.S. International Trade Commission.
“This is of great concern because Mexico is our number-one export
market,” USA Rice Chairman Dow Brantley said in a recent blog
posting. “As Mexico increases imports of milled rice, Vietnam is our number-one
competitive threat.”
The ITC report concluded the potential losses in exports to
Mexico outweigh the expected gains from increased sales to Japan.
“U.S. rice production is expected to be marginally lower under
TPP than without it in response to lower exports,” the report said. “Exports
would decline because the U.S. rice industry may find that gains in access to
the Japanese market are more than offset by lost sales to … Mexico, where the
United States would lose its current tariff advantage over Vietnam.”
But Michael Klein, a spokesman for USA Rice, said it’s still
not so simple.
“Gains in Japan all come out of California and losses in
Mexico are all pretty much borne by the South,” he said. “We’re one industry,
but it does present a challenge to look and say: ‘Are the gains offset by the
losses?’ The ITC says they aren’t and the USTR (U.S. Trade Representative) says
they are and we’re caught in the middle.”
Even California’s rice farmers aren’t certain yet how much
they would gain from the TPP deal.
“We are still analyzing how the details of the proposed
agreement might be implemented before we determine our support,” said Jim
Morris, spokesman for the California Rice Commission. “Our growers are appreciative
of any new market opportunities for their rice.”
It’s still unclear whether the projected losses in sales to
Mexico outweigh the expected gains with Japan, Klein said, but USA Rice is
certain that Vietnam is not playing fair.
On a level playing field, the U.S. could beat out Vietnam
for the Mexican market, he said, because the quality of U.S. rice is superior
and shipping costs are far less expensive. But Vietnam subsidizes its rice
farmers, allowing its exporters to sell at below market prices, he said.
“When a country we believe is not playing by the rules, then
gets a leg up on us as a result of a trade agreement, it’s like kicking us
while we’re down,” Klein said.
An ITC report released in
April 2015 backs up USA Rice’s complaints that Vietnam does indeed support its
rice industry and props up exports.
“Of all the U.S. rice types, long grain rice exports face
the most competition internationally,” the report said. “Low-priced Asian rice,
particularly from India and Vietnam, has gained market share in several
traditional U.S. export markets. Owing to the structure of U.S. rice production
and its growing regions, producers in the Southern growing region are
disproportionately affected by this competition.”
For now the Mexican tariff on Vietnamese rice continues to
assure the U.S. market share, but that won’t last if TPP is ratified, Klein
said. The tariff will gradually drop, and it’s unclear when Vietnamese rice
will become a viable competitor for the largest and most highly-prized foreign
market for U.S. farmers.
The U.S. exported about 806,000 tons of rice to Mexico in
2015, up from 739,000 tons in 2014, according to USDA.
“They’re going to
phase it (the tariff) out over 10 years,” Klein said about Mexico. “There’s
going to be a break point before the 10 years are up when suddenly, even though
there is a tariff, it will make economic sense for Mexico to buy the Vietnamese
rice.”
Meanwhile, Klein said, USA Rice is continuing to work with
the U.S. government in the hopes that the Obama administration will consider
challenging Vietnam’s rice support policies.
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