Pecan farmers pushing for fewer trade barriers

From wymt.com.

WASHINGTON (Gray DC) — The pecan farming business is booming. The industry is rapidly adding jobs in Georgia and billions of dollars to the economy in the South, but now this sector faces a stumbling block.

Pecan farmers are looking to send more of their product overseas. The Indian market looks promising, but U.S. farmers face high export costs. Now a bipartisan group of lawmakers is fighting to lower those rates.

Georgia pecan farmer Jeb Barrow has seen the pecan farming business change. He’s been a grower since 1974, and just in the past several years, he’s seen it go from a domestic market to an international one.

Now about a third of U.S. crops are shipped to China.

“That’s kind of a good news-bad news situation,” said Barrow.

“Anybody that reads the paper or looks at the news understands that some geopolitical event could occur tomorrow that could have that effect, so that’s kind of a sword Damocles if you will hanging over the industry’s head,” explained Barrow.

Ultimately, Barrow says it wouldn’t be wise for farmers to just rely on Chinese buyers. So, their interest turns to India, which has an exploding population and a diet rich in nuts.

“We have high hopes that the Indian market can – if we can get the tariff issue addressed – the Indian market can be developed and in time others as well, so everybody’s optimistic,” said Barrow.

The sticking point? U.S. tree nut farmers sending pistachios or almonds face, on average, a 10 percent tariff to ship products to India. That tariff, essentially a tax, is 36 percent for pecans.

“I think this is a huge opportunity for Georgia and the southeast. A lot of people down there have committed to pecans as a product for the future, and I think they’re right,” said Sen. David Perdue (R-GA).

Georgia Senator David Perdue and eight of his colleagues recently signed a letter to the U.S. trade representative, urging officials to negotiate lower tariffs.

“We know to grow our economy, we need open and free markets around the world. That’s what this is all about,” said Perdue.

Trade expert and Georgetown Professor Michael Czinkota says talks with India could mean a little give and take, but ultimately, both countries would benefit from streamlining trade barriers.

“From an altruistic perspective, we want their own people to do well. Because if they do well, then they buy more of our products and our relationships are likely to be better, so this whole idea of reducing the tariff on nuts is a good thing,” said Czinkota.

There are 15 pecan-producing states in the U.S., so if officials can help farmers crack into the Indian market, the impact could be tremendous.

Country Overview: Mexico

The country is one of the most important emerging economies and is renewing its efforts to become a leader in the region – it just became a member of the Pacific Alliance. Mexico has agreed on an ambitious and comprehensive National Development Plan, which also guides the structural reform agenda to enhance productivity.

The Mexican economy recovered from the severe contraction generated by the 2008-2009 global financial crisis as the economy experienced an average annual growth of 4.3 % between 2010 and 2012. More recently, weak external demand has led to stagnation in growth and prompted the Ministry of Finance to lower its growth projection for 2013 to 1.8 %.

Mexico experienced a surge in capital flows and despite significant volatility in financial variables seems to be in a sound position to deal with moderation of flows upon withdrawal of monetary support in the U.S.  A flexible exchange rate, a modest current account deficit, international reserves at US$170 billion and an IMF FCL of US$73 billion should provide significant protection against external shocks.

The adoption of structural reforms in the areas of labor legislation, education, telecommunication and competition policy, financial sector, energy and tax policy is expected to enhance potential output growth, currently estimated around 3 percent, by about a full percentage point through additional investments and eventually through higher levels of productivity that these reforms are expected to unleash.

source: Worldbank.org, image source: http://timothyrealestategroup.com

News from the USTR: Expiration of the Generalized System of Preferences Program

United States Trade Representative Michael Froman issued the following statement regarding the July 31, 2013 expiration of the Generalized System of Preferences (GSP) program.  GSP is a 37-year-old trade preference program designed to promote economic growth in the developing world by providing preferential, duty-free entry for up to 5,000 products when imported from one of 127 designated beneficiary countries and territories.

 “Beginning August 1, U.S. businesses and consumers will pay more for thousands of goods imported under the GSP program, including many inputs for U.S. manufacturing,” said Ambassador Froman.  “The Obama Administration urges Congress to extend this important trade program, which increases U.S. competitiveness, keeps costs low for U.S. consumers, and benefits some of the world’s poorest countries.”

Read more here. What is your opinion about the expiration of the GSP? Post your view in the comment section below!

Yes Virginia, the Ham Is Chinese (Part 2)

The result is economic growth at double digit levels for several decades and a rapidly expanding middle class.  This success has also led to new economic challenges as the expectations of China’s citizens for higher wages and quality of life have risen. China may well be approaching a tipping point for an economic  transition from being export focused to becoming  consumption-driven.  After  improving the world by manufacturing good basic products, Chinese businesses must now learn how to succeed through marketing and excellence.

Just as American brands like KFC, Coca Cola, Apple, Buick, and Pampers have learned how to successfully win over consumers worldwide, Chinese companies need to compete for brand preference employing more than a low price approach. Already, Chinese products are emerging as leading brands.  WPP’s 2013 BrandZ Most Valuable Global Brands research has 12 Chinese brands among the top 100 global brands. However, a closer look at this study reveals that the top Chinese brands are mostly successful in China alone, and in sectors where access by foreign firms such as telecommunications, banking and insurance, Web-based technology, and energy is restricted. Though there are many Chinese consumer brands, such as Haier, Tsingtao, Li-Ning, Lenovo, Baidu, Tencent, and Huiyuan Juice, marketing to consumers outside of China has not been highly successful for Chinese brands thus far.

Marketing guru Philip Kotler defines marketing as both an art and a science. Chinese firms have mainly concentrated on science, via price. Now they must become better at creating higher quality products, placing them in distribution outlets that Western consumers prefer, and promoting them with a direct appeal to Western emotions.  The best way to accomplish all this quickly is through the acquisition of Western firms with already established base of consumer preference.  Therefore, in addition to the establishment of new brands, we are likely to see a significant expansion of Chinese acquisitions of U.S. and European consumer goods brands in the coming years.

Is this a good thing? Acquisitions by foreigners tend to be accompanied by concerns. When U.S. giant Kraft acquired British Cadbury, there was worry about diminished  chocolate quality in the U.K. Now Americans (accompanied with much hamming it up by master comic Jay Leno) state that the Smithfield acquisition could lead to diminished quality and loss of American jobs.

Far from it ! The Chinese are not just obtaining products – imports and exports would have done that. Rather, the acquisition helps integrate China into the global economy, and contributes to its future branding success by delivering new connections, experience, capabilities and trust. The key benefits will be learning of both quality and marketing.

This article is a part of a series written by Michael Czinkota and Charles Skuba. Read part 1 here.  Guest writer Charles Skuba teaches international business and marketing at Georgetown University. He served in the George W. Bush Administration in trade policy positions in the U.S. Department of Commerce.