U.S. wheat groups support policy changes to improve exports

12.05.2017

U.S. wheat groups say policy changes are needed to eliminate barriers that reduce potential wheat exports to foreign markets, in comments made for the public hearing on an Omnibus Report on Significant Trade Deficits.

The comments were prepared by the National Association of Wheat Growers (NAWG) and U.S. Wheat Associates (USW) at the request of the Office of the U.S. Trade Representative and U.S. Department of Commerce.

“NAWG and USW strongly support efforts to correct policy barriers that reduce potential wheat exports to foreign markets,” said David Schemm, a Kansas farmer and president of NAWG. “Open markets and fair trade are critical to the U.S. wheat industry as roughly half of U.S. wheat production is exported on average.”

About half of U.S. wheat production is exported each year, contributing about $5 billion to $10 billion to reducing the trade deficit for the past decade. This also adds a total of about $5 billion to $10 billion every year to net imports in wheat importing countries.

The groups said their policy preference is for trade agreements that reduce barriers to trade and let the individual players in the markets drive trade and investment decisions.

“It is dangerous to negotiate trade agreements with the goal of managing massive trade flows, and policymakers should consider how actions apparently on behalf of U.S. industries might affect the same or other domestic industries if trading partners turned those policies around on competitive exporting industries, like wheat,” the group said in its comments.

NAWG and USW identified policy barriers erected by various countries that limit wheat export opportunities from the United States. If these barriers were removed, U.S. wheat exports would likely grow as a result, they said.

Some examples include Canada, where regardless of wheat variety, all foreign grown grain automatically receives the lowest designation in the official grading system. This has a negative impact in exports to Canada because it results in de facto segregation.

“While the market demand in Canada for U.S. wheat is not large, the United States is Canada’s largest wheat customer, and equitable border treatment should be a high priority on both sides of the border,” the groups said. “Removal of these trade barriers could result in U.S. producers delivering U.S. grown wheat into Canada’s bulk handling system if market forces were allowed to function properly.”

China is a significant market for U.S. wheat, but it could be even larger if it complied with its WTO commitments.

“If China had filled its 9.64 million tonne tariff rate quota (TRQ), assuming the same market share for the United States as exists currently, the wheat trade surplus would have tripled in 2016,” NAWG and USW said in their comments.

India is the second-most trade distorting player in international wheat trade after China, the groups said. When the government determines that there is underproduction, India raises tariffs to keep imports out. When there is overproduction it subsidizes exports and displaces more reliable suppliers from global markets. These distortions reduce returns for U.S. suppliers and consequently reduce exports and raise the trade deficit with India and other countries where U.S. wheat supplies are displaced, they said.

While the U.S. ships a fair amount of wheat to the E.U., from $230 million to $400 million in recent years, the region’s current and potential regulatory barriers could threaten this.

First, the E.U.’s efforts against biotechnology both within its borders and in other countries has made investment in these tools for wheat much more costly, and therefore wheat has become less competitive relative to other crops. Restrictive rules on Karnal bunt (KB) and deoxynivalenol (DON) create unnecessary risks for shippers, increasing the risk premiums accompanying U.S. wheat, therefore reducing competitiveness. The E.U. also increasingly takes a hazard-based approach to SPS regulations: i.e. identifying potential hazards and banning them, regardless of the actual risk of exposure, the groups said.

“Our strong policy preference has been for trade agreements – whether at the World Trade Organization (WTO), regional, or bilateral – to reduce barriers to trade and let the individual players in those markets drive trade and investment decisions,” said Jason Scott, a Maryland farmer and chairman of USW.
 


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