Turbulent trade: State’s exports remain steady

Washington’s agricultural exports held steady in 2018, demonstrating both strength and missed opportunity, as some industries suffered under new trade policies while others made gains during the year.

Exports of Washington-produced agricultural goods totaled $6.7 billion in 2018, the same amount exported in 2017. The flat growth followed a roughly 10 percent increase in exports of Washington-produced agricultural goods from 2016-17.

“The overall message of the year was lost opportunity because typically we are expanding exports and exports are growing,” said Rianne Perry, international marketing program manager for the Washington State Department of Agriculture.

But 2018 was different due to retaliatory tariffs imposed by China in the ongoing trade war, the United States’ lack of trade agreements with countries that formed the Comprehensive and Progressive Trans-Pacific Partnership, or CPTPP, and ongoing negotiations for a new trade deal in North America, each of which took their tolls on various industries.

China remained the third largest export market for Washington-produced agricultural goods in 2018, but the dairy, wheat, apple and cherry industries were among those that took significant hits in the Chinese market.

Dairy exports to China dropped by 72 percent from the prior calendar year, while wheat exports to China dropped by 81 percent, according to the state Department of Agriculture. No wheat has been exported to China since May 2018.

“(China) was a growing market so we were excited about that, and it was going to be something we could look forward to,” said Scott Yates, director of communications and producer relations for the Washington Grain Commission. “At the same time, I do believe there will be an agreement, but the timing is crucial because it can’t go on forever.”

About $66 million in soft white wheat was exported to China from Washington in the year since China stopped buying U.S. wheat.

For the cherry industry, which reported a 32 percent decline in exports to China in calendar year 2018, the drop followed significant growth in the prior year. China was the top export market for Washington cherries in 2017, purchasing $99.7 million during that calendar year, as the buying power of its middle class continued to expand. Cherry exports were up by 75 percent in 2017 over 2016.

“Overall, the sectors that were on the tariff list did decrease their exports to China, some of them pretty substantially,” Perry said.

However, there were exceptions. Washington seafood, hops and frozen french fries all increased their exports to China in 2018, despite being targets of Chinese tariffs, Perry said. One possible explanation is that such niche products aren’t available in the same quantity and quality from other markets, she said.

Chris Voigt, executive director of the Washington State Potato Commission, said the growth of U.S.-based quick-serve restaurants such as McDonald’s and KFC helped keep market demand for frozen french fries strong both domestically and in China during 2018, despite tariffs being imposed during the year.

Washington exported $798 million of frozen french fries to China in 2018, up from $756 million in 2017.

But like many of the other industries that rely on the export market for their agricultural goods, the retaliatory tariffs being imposed by China are merely one among a number of trade concerns, Voigt said.

For potato growers, the bigger concern is that the United States gets a trade agreement in place with Japan, which always has been a top market, not just for potatoes but for Washington’s agricultural products as a whole. Japan is now part of the CPTPP, a trade agreement that will gradually lessen tariffs for the 11 countries that signed the deal, which the United States did not sign. Washington exported $1.1 billion of agricultural goods to Japan in 2018 but is likely to see its market share erode in some sectors as the tariff reductions included in the CPTPP move forward.

Japan also is a top market for Washington wheat, and that industry is hopeful that a bilateral agreement with the country will be in place soon, Yates said. The wheat industry was able to maintain exports of soft white wheat to Japan in 2018 because of the specialty nature of the crop, but another year without an agreement would likely hurt, he said.

“U.S. negotiations for a bilateral trade agreement with Japan have begun to take place, and seeing an agreement there is of the utmost importance,” Perry said.

For the Washington apple industry, which exports a third of its fresh apple crop, ongoing trade negotiations in North America have been the primary concern in the past year, said Todd Fryhover, president of the Washington Apple Commission.

U.S. apple exports to its top market Mexico were hit with a 20 percent tariff in June 2018 after the United States imposed tariffs on imports of Mexican steel and aluminum. The U.S. and Mexico reached an agreement in mid-May to eliminate them, but threats of more retaliatory tariffs loom. Apple exports still face a 50 percent tariff in China, and India is threatening to implement new tariffs, as well.

The Washington Apple Commission has responded by focusing on trade promotions and by diverting some volume to new markets such as Indonesia, Thailand and Vietnam.

 “As an industry, we’re always looking at these different alternatives to maximize revenue for growers and trying to stay away from those markets that have the least return, whether they are impacted with a tariff or not,” Fryhover said.

Despite the current challenges, Washington continues to build on its strengths and invest in its export market.

The Northwest Seaport Alliance, which manages the marine cargo business and facilities for the ports of Seattle and Tacoma, is preparing to begin a $500 million modernization project that will allow Terminal 5 at the port of Seattle to more quickly and efficiently handle the largest marine cargo vessels being deployed on the Asia-Pacific trade route.

Eight of the top 10 markets for Washington’s agricultural exports in 2018 were in Asia.

“The exporter community in Washington state relies on The Northwest Seaport Alliance to get our goods to foreign markets,” said Mark Anderson, CEO and president of Ellensburg-based Anderson Hay & Grain Co. Inc., in a statement. “Without a robust import trade, our export trade becomes much more difficult. Investments like the Terminal 5 modernization end up supporting well-paying jobs all across the state.”

Construction on Terminal 5 will begin this summer and will be carried out in two phases, with the first phase expected to be complete in the spring of 2021 and the second in 2023, said Katie Whittier, spokeswoman for Port of Tacoma and The Northwest Seaport Alliance.

The U.S. Small Business Administration’s Seattle District Office also continues to support and invest in Washington’s export market across all industries. The agency is the coordinating member of the 12-agency Washington Export Outreach Team, or WEOT, an active consortium of organizations working to assist Washington businesses with expanding into international markets or further growing their presence in them.

WEOT, which hosted a half-day, “Grow Your Business Internationally” export workshop at the Tri-City Development Council in May, provides resources including technical assistance and potential funding for small businesses to enter or further expand into foreign markets, said Kerrie Hurd, district director for the U.S. Small Business Administration, Seattle district, which covers most of Washington and a part of Idaho.

More information about WEOT is available by contacting the U.S. Small Business Administration’s Seattle district offices or any other agencies involved with WEOT. “I do feel like this is an environment where there is opportunity. It’s just that people have to know the resources to go to and be able to take advantage of those opportunities,” Hurd said.