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China, US trade wars escalate

AS the trade war escalated between the United States and China this spring, American cherry exporters in Washington state unexpectedly found their customs processing slowed at the Chinese border.

Unannounced, increased inspections began in late May and in early June. The extra time the inspections took backed up shipments into mainland China, leading to some shipments rotting on the docks and forcing exporters to divert their produce so it could be sold before it spoiled.

Then, almost as suddenly as they were put in place, the increased inspections stopped, said Keith Hu, director of international operations at the Northwest Cherry Growers.

“They were able to find issues with cherries, even though there was nothing abnormal, nothing different from years prior,” Hu said.

“Shipments were held up. Some for a day, some for three days, some for five days.”

As President Donald Trump has escalated trade tensions throughout 2018, extra scrutiny and inexplicable shipment rejections have come to symbolise the pitfalls, beyond tariffs, that American firms doing business in China have faced.

Data on such disruptions is hard to come by.

But more than one in four businesses that responded to a recent US-China Business Council survey said they have been subject to increased scrutiny from Chinese regulators as a result of the increasing trade tensions.

Those companies also ranked political risk associated with the US-China relationship as their top challenge for the first time since the survey began 10 years ago.

Disparate American goods such as oranges, logs, calf skins and even Lincoln vehicles have encountered heightened customs reviews at Chinese ports this year.

Multinational companies already accustomed to the sometimes difficult environment have reported an up-tick in the number of hurdles they must jump through in order to do business in the increasingly lucrative market.

The cherry growers group — which represents 2 500 growers in Idaho, Montana, Oregon, Utah and Washington state — relies heavily on getting fresh fruit to consumers in China during the three-month window when nine varieties of cherries are ripe.

The growers ended up re-routing some sea shipments to Hong Kong or Taiwan and away from China, where the country’s large and growing middle class has embraced the fruit in recent years.

Air shipments to China, which were normally cleared by customs in half a day, also dried up.

The trade group estimated in November that tariffs and other barriers have cost the industry $89 million in lost sales this year.

Chinese officials rarely tie such actions directly to any international tensions, and they often go unnoticed outside the industries that are affected by them, trade experts said.

But they are part of a well-worn play-book for the Chinese government, which has used these and other non-tariff barriers for years during political squabbles.

Trump, a self-proclaimed, “Tariff Man” has used those taxes as the ultimate punishment when it comes to fighting a trade war against Beijing.

So far, he has imposed tariffs on about half of all Chinese imports.

He has also threatened to slap tariffs on the remaining US$267 billion in Chinese goods.

On the flip side, the total value of products that China imports from the US represents just one-fourth of what it exports, so Beijing cannot match US tariffs dollar for dollar.

But China has many other weapons in its arsenal to make doing business painful and costly.

US companies’ complaints include delays in getting licenses approved and increased regulatory requirements that have seemed to grow worse in tandem with the worsening trade relationship between the two countries.

“These are subtle types of steps. It is very hard to be definitively responsive to them.”

Mark D. Herlach, a partner with the law firm Eversheds Sutherland in Washington, said.

“It’s a hard thing to prove.”

Chinese customs authorities announced in May they were strengthening their reviews and quarantines of American apples and logs over concerns about introducing harmful organisms to China.

Joel Nelsen, president of the trade group California Citrus Mutual, said that while the customs slowdowns this year were concerning, more worrying were retaliatory tariffs by the Chinese government that increased citrus import prices by 40 percent.

“We did around 5,5 million cartons of oranges last year and another 1 million of lemons,” Nelsen said.

“China was a growing market for us. They paid a good price for a quality product.”

Nelsen said it was difficult to find new buyers for the shipments and so orange farmers had to rely on the domestic US market to absorb the extra fruit.

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