By Natalie Willis, Reporter, Valley Ag Voice
The U.S. trade deficit rose again in February following predictions of a $30 billion agricultural trade imbalance at the start of 2024. While a trade deficit is not inherently good or bad, large deficits can harm the economy and diminish a country’s influence in the global export market. A sizeable deficit such as the United States’ current projection necessitates domestic agricultural producers to seek alternative markets.
According to the U.S. Commerce Department’s Bureau of Economic Analysis, the trade deficit was $68.9 billion in Feb., up 1.9% from Jan. On behalf of American food and agricultural producers, the U.S. Department of Agriculture is looking for new markets and embarked on a trade mission to India from April 22-25. USDA Under Secretary for Trade and Foreign Agricultural Affairs Alexis M. Taylor led the trade mission.
“India’s rising middle-class consumers’ familiarity with American food products and increased purchasing power is a real opportunity for U.S. producers,” Taylor said in a press release. “This along with the Indian consumers’ trusted view of American food and agricultural products as high-quality has contributed to an 11 percent growth in U.S. agricultural and ag-related exports to India over the past 2 years.”
Clarice Turner, Almond Board of California president, expanded on the opportunity to trade with India during a press conference commemorating her first 100 days in office.
“Fifty percent of the population in India is under 30 years old…and it is now the largest population in the world, relatively stable economy, and good politically from a stability standpoint. [It’s] a very attractive market to us,” Turner said.
In March, Taylor led a trade mission to South Korea with several California agricultural leaders such as CDFA Secretary Karen Ross. An opportunity for California’s specialty crops was uncovered in South Korea as they experienced strong interest in U.S. fruit and vegetables, nuts, dairy, eggs, coffee, and distilled spirits.
The trade mission resulted in $67 million in 12-month projected sales to South Korea which ranks as the United States’ fifth-largest single-country export market.
“We had several California fresh fruit sectors represented; some tree nuts represented. So, while we have exports there, I think we are also looking to continue to grow and expand those,” Taylor said. “We’re working on expanded market access, for instance, of nectarines and so the Tree Fruit Association was there because they have some interest in already exporting, but also looking towards potentially new market access for California nectarines.”
TRADE DEFICIT
In the past, the U.S. generally exported more agricultural goods by value than it imported, but a robust increase in demand for imports created a negative trade balance for the past three fiscal years.
A trade deficit is the result of a negative trade balance wherein a country imports more goods than it exports, causing investors to seek opportunities in foreign markets. The agricultural trade deficit for 2024 is projected to reach a record of $30.5 billion — an unsustainable decline according to Senators Chuck Grassley, John Thune, John Boozman, and Mike Crapo who wrote a letter urging U.S. Trade Representative Katherine Tai and Agriculture Secretary Tom Vilsack to expand global markets for American producers.
According to the Senators, the sharp decline in U.S. agricultural exports is directly related to an “unambitious” trade strategy that fails to meaningfully expand market access or reduce trade barriers.
“While the Biden administration continually refuses to pursue traditional free trade agreements, China, Canada, the European Union, the United Kingdom, and others continue to ink trade pacts that diminish American export opportunities and global economic influence,” the letter stated.
Correcting the agricultural trade imbalance lay in the hands of the federal government, and U.S. Representatives Jim Costa, Jimmy Panetta, Adrian Smith, and Dusty Johnson have made it a priority by launching the bipartisan Congressional Agricultural Trade Caucus. The caucus was created to boost agricultural exports and address hindering trade barriers.
In a press release, the representatives explained that trade policies to benefit farmers, ranchers, producers, and others within the food and agricultural supply chains are paramount to counteracting the trade imbalance.
“Access to global markets is critical to our agricultural economy in the San Joaquin Valley, the breadbasket of the world,” Costa said. “As Co-Chair of the Agricultural Trade Caucus, I look forward to working together to promote trade policies that will ensure American farmers remain competitive on the global stage.”
FOREIGN TRADE BARRIERS
Obstacles to trade such as foreign barriers continue to pose an issue for domestic agricultural importers in the U.S. as they seek alternative international markets. At the end of March, U.S. Trade Representative Katherine Tai released the 2024 National Trade Estimate Report on Foreign Trade Barriers, highlighting challenging regulations in important agricultural markets such as China and India.
“The NTE Report highlights cross-cutting barriers affecting U.S. agricultural trade…such as Indonesia’s facility registration requirements for dairy, meat, and rendered products, and the People’s Republic of China’s (PRC) requirements across a wide range of food and agricultural products; sanitary and phytosanitary (SPS) measures that are not based on science, are maintained without sufficient scientific evidence, or are applied beyond the extent necessary to address SPS issues, such as India and Turkey’s procedures and requirements for agricultural biotechnology approvals…” Tai said in a press release.
However, Tai explained that the deficit should not be cause for alarm as part of its nature is a result of a strong U.S. dollar.
“The U.S. dollar is forecast to appreciate into calendar year 2024 at 1.8% globally, which continues to expand U.S. imports while presenting a challenge to U.S. exports,” Tai said.
Still, resolving trade barriers is vital to the future and success of the agricultural economy. While China followed through in implementing some provisions it agreed to in the Economic Trade Agreement Between the Government of the United States of America and the Government of the People’s Republic of China in 2020, it has not followed through on some of the more pertinent commitments.
According to Tai’s report, Chinas implemented significant reforms in ag sub-sectors including meat and poultry products as well as facility registration but failed to act on commitments to purchase certain amounts of specific U.S. goods and services in 2020 and 2021.
China also imposed tariffs in 2018 ranging from 15% to 25% on a range of agricultural, steel, and aluminum products in retaliation against the U.S. decision to adjust imports of steel and aluminum products which resulted in overproduction from China.
The U.S. launched a dispute settlement against the retaliatory tariffs, and, in August 2023, a World Trade Organization panel found the tariffs were inconsistent with WTO. China appealed the panel’s ruling in Sept. 2023.
One of the most favorable markets for the U.S. is India which has seen significant trade traction after retaliatory tariffs were lifted. Last June, India also removed a 20% import duty burden imposed in 2019 which was a significant trade barrier.
The removal of these tariffs will build on the $15 billion in new or preserved market access for agricultural products, U.S. Agriculture Secretary Tom Vilsack said in a press release.
Additionally, the UK recently announced it would suspend tariffs for at least two years on raw almonds from the U.S. The result, according to Turner, represents $4 million annually in relief.
SPECIALTY CROPS
The USDA announced two specialty crop initiatives at the beginning of 2024 —Assisting Specialty Crop Exports and Specialty Block Grant Program — to increase global exports and boost the competitiveness of the expanding specialty crop sector.
The ASCE initiative is particularly notable for the $65 million in project funding to help the specialty crop sector increase global exports and expand to new markets. Administered by the USDA’s Foreign Agricultural Service, ASCE will collect information necessary for export certification and packaging to meet other countries’ requirements.
“Each specialty crop product faces a myriad of import standards in every market it enters, including plant health standards, facility and product certifications, packaging requirements, licensing, inspections, maximum residue limits for pesticides and fungicides, and various import permits,” Under Secretary Taylor said in a press release. “In order to meet all these requirements, it takes significant investment by commodity organizations and producers to navigate the gauntlet of regulations.”
The Specialty Crop grant program will provide $72.9 million in granting funding to projects designed to increase the competitiveness and expansion of the specialty crop sector.
