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Statement to the International
Trade Commission
This document was submitted to the International Trade Commission to comment
about how increasing exports of citrus from EU countries is adversely
affecting the U.S. and global marketplace in that fruit is arriving at prices that erode market share and revenues for
the California grower.
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STATEMENT TO THE INTERNATIONAL TRADE COMMISSION
APRIL 26, 2001
THE EFFECTS OF EU POLICIES ON THE COMPETITIVE POSITION
OF THE U. S. & EU HORTICULTURAL PRODUCTS SECTORS
INVESTIGATION NO. 332-423
SUBMITTED BY CALIFORNIA CITRUS MUTUAL
JOEL NELSEN, PRESIDENT
512 N. KAWEAH AVE.
EXETER CALIFORNIA 93221
559.592.3790
INTRODUCTION AND SUMMARY
This statement is filed on behalf of grower members within California Citrus Mutual.
California Citrus Mutual (CCM) is a producers’ trade association with a grower only
membership, farming over 110,000 acres of oranges, lemons, tangerines and other
varieties of California citrus. Their production has a farm gate value in excess of $500
million. The role of CCM is to inform its grower members, advocate on their behalf and
educate them in matters related to their economic well being.
CCM is filing these comments from the perspective that increasing exports of citrus from EU countries are adversely
affecting the U.S. and global marketplace in that fruit is arriving at prices that erode market share and revenues for
the California grower. Furthermore, CCM believes that existing policies within the EU, which I will explain later, offer
the citrus producer “the opportunity” to generate a profit (or reduce expenses) thus eliminating the need for the EU
producer to be solely dependent upon carton sales revenue for profits or cost recovery.
Inasmuch the California producers do not receive domestic support and must meet a number of state
and federal regulations which impose elevating production costs, our producers are unable to meet the import sales prices.
To do so would result in gross revenues less than the cost of production, packing and marketing expenses. This, obviously, is not a level playing field.
It is CCM’s intent, therefore, to quantify the size and scope of the EU citrus industry, primarily Spain, and
hat of the United States, with the focus on California. I’ll also offer specific directions for the International
Trade Commission to explore as they commence the investigation.
I believe the conclusion of the ITC investigation will echo the review conducted
by CCM that the EU subsidy programs create an unfair trade advantage for the EU
producer exporting to the United States and around the world.
EU INDUSTRY STRUCTURE
For purposes of our comments, California Citrus Mutual
defines mandarins, Clementine and tangerines interchangeable.
For the most part, domestic and foreign industry look to the term
tangerine as the parent and all other varieties as offspring or slight varietal differences.
Our industry marketing experience supports the contention that this family of tangerines are interchangeable in the
marketplace. Buyers rarely, if at all, carry more than one variety of tangerines at the consumer level.
According to compiled reports from USDA, FAO UN, and the Department of Commerce,
Spanish Clementine acreage increased by 20 percent in the period from 1996 to 2000.
At the same time, due in part to the maturing of recent planting, production has
increased 45 percent. Production for the 2000/2001 season is estimated to be 87.06 million 40-lb. cartons.
The majority of the planting has occurred in Valencia, Spain with a smaller industry
developing in Andalusia, Spain followed by production in Murcia, Spain.
Total production in Valencia is expected to reach 1,420 metric tons followed by
117 tons in Andalusia and 46 tons in Murcia, Spain. Total acreage is approximately 250,088 acres.
Available data indicates that 70-75 percent of the Spanish production is exported.
The United States accounts for 27 percent of that export quantity
or 6.5 percent of total Spanish production. In the 1995-1999 time frame exports to the United States increased 400
percent.
It should be noted that mandarin tariff rates into the U.S. are 1.9cents/kg, which
is in stark contrast with 16 percent into the EU. With the exception of South Africa, which has a 4 percent tariff rate, all other importing
countries have higher rates than the EU.
The majority of exports into the United States arrive in the Fall/Winter time frame,
in direct competition with California tangerine varieties and navel oranges.
It is important to note the impact on Navel oranges inasmuch the compendium for the
FAO Intergovernmental Group on Citrus Fruit committee session held September, 1998 reports:
" . in the U.S. indicates that the higher demand for imported tangerines has not
been at the expense of other fruit but, rather, in direct competition with
other citrus fruit mainly oranges and traditional tangerine varieties.
Eurostat reports that in 1998-1999 Spain exported 43,242 metric tons to the United States. In 1999-2000 the figure had exploded to 71,357 tons.
CALIFORNIA INDUSTRY STRUCTURE
The California Department of Food & Agriculture Resource Directory 2000 reports
tangerine bearing acreage at 8600 total acres in 1999 with another 1900 non-bearing acres planted.
Production is approximately five million 40-lb. cartons and is expected to increase as the plantings mature. The average allocation to fresh market channels is 75-80 percent with
the balance directed to processed products or waste. California production figures are somewhat skewed in that figures
for the 1999 marketing season are influenced by a devastating freeze in December, 1998.
According to the USDA/NASS Annual Price Summary report,
published July 1999, the average carton price for California tangerines in 1996
was $16.39. In 1998 that figure had plummeted to $9.48 per carton.
The U.S. total/average in 1996 was $16.66 per carton and that the equivalent figure in
1998 was $12.41. Domestic acreage/production figures indicate minimal growth for that time frame.
CCM concludes the majority of this revenue loss is directly attributable to EU/Spanish Clementine
imports.
CCM COMPETITIVE ISSUES OF CONCERN
Extensive citrus subsidy programs have been reported by the EU.
According to the European Commission’s notification to the World Trade Organization, the EC provides $204
million worth of support to the EU Clementine producer (Aggregate Measure of
Support, AMS). An additional $71 million was specific to mandarin producers and another $14 million was
allocated to producers of the satsuma variety. As an aside, the orange producer received approximately $478 million to
assist in their efforts. Contrast that with the AMS payments to domestic producers of all citrus, zero.
California Citrus Mutual is aware of several support programs that exist within the EU and the country of Spain.
ITC representatives should determine the level of transparency to identify the true level of assistance.
For example, the EC has assistance programs for the withdrawal of surplus production.
There is a second program in which normal revenue for distributing
product into the processing channel is augmented.
CCM recognizes that both of these programs have caps in
place, but the combined revenue helps offset costs to the grower.
CCM is also aware of producer organizations and their role
in assisting grower members to develop “operation programs” resulting in
rebates back to growers, again offsetting costs.
The operational plans meet pre-determined criteria for expense
reimbursement. Rebates can be used to cover costs associated with chemical use, production assistance and land use
consultation for example.
CCM urges the ITC to examine specific Spanish programs
that provide funding for less favored areas, agri-environment measures and
structural fund support programs to disadvantaged regions.
It should be determined as to whether this assistance is being used to underwrite grove modernization, irrigation
modernization expense, equipment purchase, retirement programs and entry
assistance.
CCM CONCLUSION
California Citrus Mutual is of the opinion that these assistance programs impact exports into the U.S. as well as the ability of the
U.S. industry to export to the EU and third world markets. The impact is negative
EU producers are not totally reliant on the sales price
for a carton of fruit to cover their costs. Thus they have the ability to reduce carton values and “buy” their way
into U.S. and foreign markets to the detriment of the U.S. producer.
The U.S. producer/marketer is obligated to sell at a specific level to offset all costs incurred and achieve an adequate
return on investment.
Further, the U.S. producer cannot export into the EU inasmuch fruit grown internally can be sold at a very low price as the
assistance programs more than offset the cost of production and marketing.
These additional sources of revenue for the European producer, or stated another way, the expense reimbursement programs,
offer the European producer sufficient revenues per acre to provide a more than adequate profit margin.
The issue is not exclusive to imports and exports between
the U.S. and the EU. As is so often stated, the market is global in nature therefore the impacts are
worldwide. This impact diminishes an often stated argument that the assistance is domestic related only.
The marketplace knows no such difference!
This unfair advantage definitely impacts the U.S., specifically the California tangerine or Clementine producer, negatively.
A thorough investigation by the International Trade Commission, we believe, will lead to the same conclusion.
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