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Project Justification PRESIM Project “Design of Systems Approaches to Invasive Pest Risk Management” (43-3AEM-3-80087) Technical Barriers Affecting Agricultural Exports from China: The Case of Fresh Apples David Orden, Lili Gao, Xiang Xue, Everett Peterson and Suzanne Thornsbury December 2007 GII Working Paper No. 2007-2 Authors David Orden is Senior Research Fellow, Markets, Trade and Institutions Division, International Food Policy Research Institute (IFPRI), Washington D.C. and Professor, Institute for Society, Culture and Environment, Virginia Polytechnic Institute and State University, Alexandria, Virginia. Lili Gao is Graduate Research Assistant, Department of Agricultural Economics, Michigan State University, East Lansing, Michigan. Xiang Xue is formerly Graduate Research Assistant, Department of Agricultural and Applied Economics, Virginia Polytechnic Institute and State University, Blacksburg, Virginia. Everett B. Peterson is Associate Professor, Department of Agricultural and Applied Economics, Virginia Polytechnic Institute and State University, Blacksburg, Virginia. Suzanne Thornsbury is Associate Professor, Department of Agricultural Economics, Michigan State University, East Lansing, Michigan. Table of Contents List of Appendices ........................................................................................................................ iv Acknowledgements ....................................................................................................................... v 1. Introduction ............................................................................................................................. 1 2. Global Apple Production, Consumption and Trade ............................................................ 9 2.1 Global Apple Production .................................................................................................. 9 2.2 Global Fresh Apple Consumption and Trade ................................................................. 18 2.3 The Global Processed Apple Industry ............................................................................ 26 2.4 Fresh Apple Trade Disputes............................................................................................ 30 3. Elements of a Hypothetical Regulation for U.S. Imports of Chinese Fresh Apples ....... 36 3.1 Review of Existing Regulations...................................................................................... 38 3.2 Basis for a U.S. Systems Approach for Chinese Fresh Apples ....................................... 46 3.3 Potential Pests of Concern .............................................................................................. 47 3.4 Hypothetical Systems Approach Measures .................................................................... 58 3.5 A Hypothetical U.S. Systems Approach for Chinese Fresh Apples ............................... 74 4. Field Interviews Concerning Chinese Apple Exports........................................................ 76 4.1 History of Negotiations ................................................................................................... 78 4.2 Perceptions of Obligations under the Current Requirements for Exporting ................... 80 4.3 Technology and Cost Considerations .............................................................................. 81 5. Model of Possible China-U.S. Fresh Apple Trade ............................................................. 93 5.1 Benchmark Data.............................................................................................................. 93 5.2 Description of the Model .............................................................................................. 103 5.3 Model Results ................................................................................................................ 117 6. References ............................................................................................................................ 123 ii List of Tables Table 2.1. World Leading Apple Producers, 2000 and 2005 ........................................................ 10 Table 2.2. Production Costs for Major Apple Producing-countries ............................................. 12 Table 2.3. U.S. Apple Production, Yield and Acreage, 1998-2005 .............................................. 15 Table 2.4. U.S. Apple Production and Season-average Grower‘s Prices for Major Apple- producing States, 2002-2004 ...................................................................................... 16 Table 2.5. Leading Apple Exporters, 2000 and 2004 ................................................................... 20 Table 2.6. Canadian Apple Production, Yield and Acreage, 1998-2005 ...................................... 24 Table 2.7. Canadian Fresh Apple Imports (metric tons), 2000-2004 ........................................... 26 Table 3.1. References for a Hypothetical U.S. Systems Approach for Chinese Apples .............. 39 Table 3.2. Summary of Regulations for Chinese Ya Pear and Fragrant Pear Exports to the U.S. ...................................................................................................... 40 Table 3.3. Summary of the Regulation of Fresh Chinese Apple and Pear Exports to Canada ..... 45 Table 3.4. Summary of Pests Listed in the Reference Policies .................................................... 48 Table 3.5. Comparisons of Pests of Concern from References .................................................... 49 Table 3.6. Pests of Concern Selected for U.S. Imports of Chinese Fresh Apples ........................ 52 Table 3.7. Summary of Characteristics of Three Quarantine Pests .............................................. 55 Table 3.8. Pre-harvest Measures in Systems Approaches for Chinese Apples and Pears ............ 60 Table 3.9. Harvest Requirements in Systems Approaches for Chinese Apples and Pears ........... 62 Table 3.10. Post-harvest and Handling Measures (including storage and packing) in Systems Approaches for Chinese Apples and Pears ............................................... 63 Table 3.11. Shipping and Distribution Measures in Systems Approaches for Chinese Apples and Pears ........................................................................................... 65 Table 3.12. Hypothetical Systems Approach for U.S. Imports of Chinese Fresh Apples ............ 75 Table 4.1. Components of Apple Production Costs by Province in 2004 (per hectare) ............... 84 Table 5.1. Trade of Fresh Apples for Benchmark Regions (metric tons), Averages 2003 and 2004 ...................................................................................................................... 95 Table 5.2. Balance Sheet of Fresh Apple Supply and Demand in Benchmark Regions .............. 96 Table 5.3. Derived Wholesale Prices of Fresh Apples for the Benchmark Regions (dollars per metric ton)................................................................................................ 99 Table 5.4. Derived FOB Prices of Fresh Apples for the Benchmark Regions (dollars per metric ton)................................................................................................ 99 Table 5.5. Derived Shipping Cost of Fresh Apples for the Benchmark Regions (dollars per metric ton).............................................................................................. 100 Table 5.6. Tariff Imposed on Fresh Apples for Selected Regions .............................................. 101 Table 5.7. Base Model Parameter Values ................................................................................... 114 Table 5.8. Uncompensated Demand Elasticities for Selected Regions ...................................... 115 Table 5.9. Apple Model Simulation Results ............................................................................... 120 iii List of Figures Figure 2.1. World Apple Production, 1991-2005 ......................................................................... 10 Figure 2.2. Estimates of Production Costs for Selected Provinces in China, 2004 ...................... 13 Figure 2.3. U.S. Apple Imports 1990-2005 .................................................................................. 22 Figure 2.4: World Leading Apple Juice Producer: 2002/03-2004/05........................................... 28 Figure 3.1: Peach fruit moth (left), Brown rot (middle) and Hawthorn spider mite (right) on apples ..................................................................................................................... 54 Figure 5.1. Preference Structure for Representative Consumer in US, NA, EU-15, China, and ROW ................................................................................................................. 104 Figure 5.2. Preference Structure for Representative Consumer in SHE ..................................... 106 Figure 5.3. Preference Structure for Representative Consumer in ASEAN ............................... 106 Figure 5.4. Computing Producing Surplus ................................................................................. 112 List of Appendices Appendix I: World Apple Production and Trade ......................................................................... 33 Appendix II: Field Research Itinerary and Interviews .................................................................. 89 Appendix III. Apple Orchards and Packinghouses Exporting to Canada in 2006/07 .................. 91 iv Acknowledgements This report represents
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