Prepare to trade fruit with China
‘If 10% of China’s population are potential customers, that’s 80 million people,’ says agricultural economist Daan Louw. He spelled out the risks, challenges and rewards of fruit trade with China to Wouter Kriel.
SA has exported citrus to China since 2005 and will soon be trading apples, pears and table grapes.
Trade negotiations opened in 1998, and in 2004 SA and signed both a Memorandum of Understanding for strategic partnerships, and a protocol governing SA’s citrus exports. Apple and pear exports were to follow, then table grapes, but the SA Apple and Pear Producers’ Association, concerned about apple and pear dumping on our lucrative domestic market, left negotiations until China joined the World Trade Organisation (WTO), whose rules prohibit dumping. has since become a member of the WTO. According to the WTO’s definition, dumping occurs when one country offers a product in another country for less than its production cost in the country of origin, or less than the retail price in the country of origin. Another definition involves “production of the product below the cost at which it is produced in a third country”.
Recently, the US used this definition to prove China was dumping apple juice concentrate there, using India as the third country. Are we at risk of dumping? C urrently, local table grapes are ready for export to China under the Table Grape Export Protocol, but there’ll be a period of 12 to 18 months where China can export apples and pears to SA without receiving exports in return. Agricultural economist Daan Louw, who’s also director of Optimal Agricultural Business Systems, says fears of Chinese apple and pear dumping are unfounded.
“Fresh produce isn’t cheap T-shirts,” he says. dumping is unlikely for several reasons: China’s agricultural sector isn’t as sophisticated as SA’s; with 380 million farmers, organised agriculture as we know it is impossible, and can’t afford subsidies; and farming, done on very small units, is less efficient than SA commercial farming, producing fewer apples and pears of lower quality. I t is therefore unlikely that China will be able to deliver apples and pears onto the SA market at lower prices than local produce, says Louw.
But for SA, the benefits of trade can be huge. Louw explains that our traditional EU markets are under pressure, and shifting 10% to 15% of apple and pear exports to will grow our industry. We only need to target a few major cities with a high-value, quality product aimed at the upper end of the market – some 45 million people live in a 300km radius of Beijing alone. Strict table grape protocol T he strict phytosanitary requirements of the table grape protocol will be very difficult for SA to comply with. Exporting to the East involves several days’ sailing on the equator, compared with crossing it in only one day to reach northern-hemisphere countries. Cold-regime regulations are crucial and consignments may be rejected because of minuscule deviations.
According to Section 6 of the protocol, grapes must be kept at -0,5ºC for no less than 22 consecutive days. Any increase above 0ºC will nullify the treatment, and it will have to be repeated. Louw says that such low temperatures can cause frost damage to grape stems. So each container must have three temperature probes in specific locations, where temperature fluctuations are most likely. Doing business Although this will be the first season table grapes will be exported to China under the protocol, such exports are already an established business through “grey” channels, where dubious agents and officials require bribes, which Louw estimates at between R30 000 and R70 000 a container. If 4 000 cartons are packed per hectare, this means R34 000/ha in additional costs. Without protocol standards, unhygienic handling can hurt appearance and shelf life.
SA grapes are sometimes transported on open trucks to inland China. The protocol can save exporting farmers money and ensure proper cold-chain management, enhancing the image of SA grapes on China’s supermarket shelves. But doing business in China isn’t clear-cut, says Louw, who travelled there recently to meet roleplayers in Chinese agriculture. “It is all about relationships,” he says. “You need to establish trust before you can even contemplate doing business.” Good relationships with relevant officials in both countries could be the difference between consignments being rejected or treated with an alternative sterilisation measure. SA has promised to curb grey exports to China, but Louw warns that if the protocol proves too difficult, some exporters might revert to their established channels. Contact Daan Louw on (021) 870 2953 or fax (021) 870 2915. |fw
