Japan and South Korea are founding members
and China and Taiwan (2001 and 2002) more recent members
of the
World Trade Organization, the international body created
in 1995 to set “the global rules of trade between
nations” (www.wto.org).
In regard to the U.S. wheat trade with Japan, South
Korea, China, and Taiwan, the WTO has set what are
known as
tariff-rate quotas, or TRQs. The quotas vary from country
to country but are designed to ensure fair trade and
prevent nations from setting tariffs that will eliminate
competition from another country’ products.
Tariff-rate quotas for China, a relatively recent member,
are steadily rising, meaning that the potential market
for the United States and other foreign nations is growing.
The way TRQs work is that a certain amount of wheat can
be sold, subject to a low duty, or payment, but, once
that quota is reached, the duty on subsequent sales becomes
much higher.
The WTO also tries to ensure that countries not subsidize
their wheat in ways that give them an economic advantage
over the wheat of other nations. The WTO is the forum
for negotiating and resolving such issues.
Still, there are a number of ways countries can use their
bureaucracies to limit access to markets.
These can include making it difficult for foreign businesses
to find out which domestic companies have been given
import licenses or granting import licenses that allow
such small amounts of imports that they aren’t
economically feasible. China was accused of doing both
during the early days of its WTO membership, though
such problems seem to have been ironed out (The American
Chamber
of Comerce-China).
Countries can also make regular changes in food regulations
and inspection methods to make it difficult for outsiders
to do business there, as South Korea has sometimes been
accused of (Agriculture and Agri-Food Canada).
Phytosanitary issues are a major point of contention
and are sometimes a non-tariff barrier that countries
use to shield domestic industries from foreign competition.
Phytosanitary refers to plant health and includes any
number of plant diseases that can affect human health,
product quality (such as the color of flour), or can
infect domestic wheat if tainted grain is brought in
from another country.
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| Bakery in farmers' cooperative in Tsukuba, Japan.
photo by N. Larzalere. |
Nations, of course, have a legitimate concern about
the quality of imported food, that it will not make
their people ill, nor will it spread disease to their
crops.
Under the WTO, member states can set their own standards regarding what can
cross their borders. But those standards must be
based on sound science and not arbitrary
restrictions designed to discriminate against a certain product or country
(WTO).
Two wheat diseases are examples of phytosanitary issues that affect trade with
East Asia and elsewhere. TCK smut, also called dwarf smut or bunt, primarily affects wheat in the Pacific
Northwest because it thrives in crops planted under snow in unfrozen soil.
The fungus can result in smaller plants, lower yields, and infect the heads
of the
plants with spores that have a fishlike odor and can spread to other plants.
Though wheat containing TCK does not make people ill, it still has an effect
on the market value: TCK changes the color of the flour and thus renders it
less appealing to the aesthetic sensitivities of Asian consumers (Line).
Before China joined the WTO, TCK smut was a major issue, with China banning
imports of wheat from seven western and Pacific Northwest states. Slowly and
steadily,
the issue has diminished, with China dropping that seven-state ban. Now, a
maximum allowable number of TCK spores has been established for U.S. wheat
imported into
China, no matter where it is grown, and it’s a standard American wheat
has been able to meet. The first ship in many years to carry unrestricted cargo
of northwest U.S. wheat to China sailed in early 2000.
Karnal bunt is a disease that can affect Kansas wheat,
though it usually occurs in California, Arizona,
and Texas. Karnal bunt can also affect yields and
flour
color. In infected areas, the USDA quarantines wheat, testing for karnal bunt
and, if the crop is clean, certifying it so it can be shipped out of the area.
The United States has considered ending the quarantines, but the costs would
be high because of adverse reactions by China, South Korea, Taiwan and other
markets (Vocke, Allen, and Price). Because of concerns about karnal bunt, Kansas
requires that seed be tested for the disease (Kansas Secretary of Agriculture).
The WTO has brought normalization to tariffs, but phytosanitary issues are
expected to continue on some level, as nations try to get the best wheat at
the best price
and preserve domestic markets at the same time.
“Now the latest game to play is to slow down other countries’ exports,” said
John Oades of U.S. Wheat Associates. “So we get issues like karnal bunt,
TCK, pesticides. You just have to address these as they come along, and you
have to do it on a scientific basis with the help of other countries.”
Next: GMO wheat and East Asia
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