An open trade policy for U.S. imports of fruits and vegetables may be good for consumers, but it has done no favor for the U.S. fresh produce trade, according to a government report.

Lower U.S. tariffs on incoming fresh produce (compared to other counties), increased competition from low-cost exporters and lingering nontariff trade barriers on U.S. exports are among the factors contributing to an increasing fruit and vegetable trade deficit, according to a May Congressional Research Service report.

The U.S. was a net exporter of fruits and vegetables until the mid-1990s, author Renee Johnson said in the 16-page document.

In 1995, the U.S. had a surplus of $300 million in fresh and processed fruit and vegetable trade, but by 2009 the surplus had turned into a $6 billion deficit, as exports of $10 billion lagged imports of $16 billion.

The imported share of total U.S. fresh fruit demand increased from 23.9% in 1980 to 38.5% in 2005. The imported share of U.S. fresh vegetable demand climbed from 8.5% in 1980 to 13.6% in 2005, according to the report.
The average annual growth for imports of fresh and processed fruits and vegetables averaged 6% from 1990 to 2009, while the average annual growth for exports was 4%, the report said.

The value of fruit and vegetable exports has doubled since the 1990s, with strong gains in exports of fresh strawberries, berries, peaches, pears, apples, grapes, lettuce, spinach, tomatoes and potatoes.

Even so, the value of fruit and vegetable imports has tripled since the 1990s. Johnson said. Increased imports were greatest for fresh citrus, strawberries and other berries, tropical fruits, grapes, peaches, pears, plums and apples.  Johnson said that roughly one half of the trade deficit for fruits and vegetables is accounted for by bananas, tomatoes, bell peppers and other vegetables.

Tariff disparity

The report said the disparity between U.S. duties and the tariffs in other countries is significant and may be a key reason the growth in exports hasn’t kept pace with imports.

The U.S. Department of Agriculture reports the average global tariff for fruits and vegetables is more than 50% of the import value, the paper said. In the European Union, more than 60% of import tariffs range from 5% to 25%. Much higher tariffs are in place in China, Egypt, India, South Korea and Thailand, the report said.

By way of contrast, about 60% of the U.S. tariffs on imported produce are less than 5%.

Some foreign citrus producers are able to access the U.S. market virtually dutyfree while U.S. citrus exports are confronted with huge tariffs, said Mike Wootton, senior vice president for corporate relations and administration for Sunkist Growers Inc., Sherman Oaks, Calif.

“In the case of Korea, we expect that later this year they are going to have access to the U.S. market in all states for their unshu oranges, and those will come in at less an 1% duty,” he said. “Meanwhile, as we try to market our navel oranges into Korea, those are confronted with a 50% ad valorem duty, which is huge and raises the price of the produce in the marketplace.”

Wootton said U.S. negotiators should aim to get equivalent market access for U.S. exports if imports can enter duty free.

U.S. exporters of potatoes, onions, grapes, pears, cherries, strawberries and other items are subject to tariffs applied more than a year ago by Mexico in retaliation to a North American Free Trade Agreement dispute over truck access.

John Keeling, executive vice president and chief executive officer of the National Potato Council, Washington, D.C.,  said the potato industry also has continuing concerns about U.S. fresh potato market access in Mexico.

Factors linked to rising fruit and vegetable trade deficit:

  • Open U.S. import policy and lower average import tariffs compared with other countries
  • Increased competition from low-cost or government-subsidized product
  • Continued nontariff trade barriers for U.S. exports
  • Market opportunities for off-season supplies
  • Increased U.S. investment overseas/diversification in sourcing by U.S. companies

Source: Congressional Research Service

Tariffs widen import-export gap