Miguel Gómez works tirelessly to take the research done in the Ivy League halls of Cornell and make sure it gets out in the industry where it can actually change the world. He has spoken at both The New York Produce Show and Conference and The London Produce Show and Conference,and we have highlighted these presentation in pieces such as these:
This year Professor Gómez is doing a sabbatical year in Zaragoza. This year he not only brings his ideas, but he has helped expand our University Interchange Program.
The students are coming from the MS program in Agro-Food Marketing at IAMZ. The IAMZ is part of a European Union Institution, called the International Centre for Advanced Mediterranean Agronomic Studies. The students come primarily from the Mediterranean region,and they are really outstanding students. Professor Gómez has been teaching a module in this MS program for the past eightyears.
We are always looking to expand both the intellectual capital of the industry and the talent pool from which the industry draws its future, and with Professor Gómez, we get a too-fer!
We asked Pundit Investigator and Special Projects Editor Mira Slott to find out what the good professor has in store for us this year in London:
Miguel I. Gómez
Associate Professor
Charles H. Dyson School of
Applied Economics and Management
Cornell University
Ithaca, New York
Q: It is always an honor to have you present your eye-opening research at The New York Produce Show and Conference and The London Produce Show and Conference as well as the Global Trade Symposium and Foundational Excellence Program, and various thought-leader panels. You have played an important and supportive role in addressing myriad issues facing the industry. What is the scope of this year’s talk?
A: I will critically examine how trade liberalization and globalization of food supply chains impact produce businesses, looking at global trade patterns and trends in countries driving global demand, and factors affecting the competitive landscape. These include import regimes, global food industry structures, nontariff barriers, and government policies. In that context, I will highlight opportunities and threats for produce businesses resulting from globalization.
Q: You’re certainly covering a lot of ground, which is par for the course as attendees enamored with your information-packed presentations can attest. Could you walk us through the points you’ll be discussing?
A: I will be talking about trends in global trade for fruits and vegetables in exports but also in consumption. I will discuss cases of countries that have increased exports dramatically in recent years, specifically Mexico and Peru. The first point I want to make is global exports of fruits and vegetables have increased dramatically.
Q: Do you have comparative numbers on sales and volume growth?
A:Global trade overall has more than doubled in value in the past 10 years. In 2004/2005, the amount of exports was $50 billion per year, while just in 2014, we had $106 billion in trade.
This is incredible growth in dollars. In terms of volume, in metric tons exported, this increase is only about 50 percent in that same period between 2005 and 2014. It means international trade is driven primarily by high-value products; high-priced fruits and vegetables. Examples of low value would be bananas and onions, which are important for export volume, but the growth is not there.
The growth is in high value items, such as asparagus, broccoli, mandarins, special harvest apple varieties, and grapes, which have spiked in growth the last few years.
Q: Are there government statistics on which products are experiencing the fastest growth and from what countries?
A: In general, international trade for most fruit and vegetable products has increased. However, according to the USDA Trade database, the fastest increases taking place for fruits: dates, figs, pineapples and grapes (fresh), and for vegetables: carrots, turnips, onions, shallots, cabbage, cauliflower and fresh tomatoes.
As you can see, the growth has been driven by ‘not-so-exotic’ products, but their value in the international market has increased substantially. It’s noteworthy that China, according to FAO data, has experienced the fastest growth in both fruit and vegetable consumption in the past decade. Products driving increased per capita consumption of produce in China, according to the FAO database for fruits: citrus products, apples, pineapples, and for vegetables, peppers, peas and tomatoes.
Q: Compared to other countries, is China unusual in its increased per capita consumption of fruits and vegetables?
A: I will talk about trends in consumption. First in vegetables, when you look at public consumption, according to the Food and Agriculture Organization of the United Nations, the only country increasing vegetable consumption is China of the main country importers, based on per capita. Total imports are still increasing because there are more people.
Asian countries tend to have highest per capita consumption of vegetables. Mainland China and Asia are driving up demand for vegetables more and more. I have aggregate numbers per capita consumption. I’m building my numbers from Food and Agriculture Organization data bases.
Q: What is important for attendees to know in relation to this data you’ll be providing?
A: The insight, first off, is that the industry will depend more and more on international trade. Second, most of the growth in fruit and vegetable imports is happening in China and Southeast Asia. The third point is increasing export opportunities from Mexico and Peru. Industry businesses in different countries are taking advantage of growth in these regions.
Basically, what I want to tell the audience, international trade of fruits and vegetables is becoming more important. People interested in the sector should be thinking globally.
Q: In the U.S., amid presidential election politics, free trade agreements have become a hot button of debate. What insights can you provide here?
A: These trade agreements are going to be good for the produce industry because more trade equals more wealth and more business for the industry. Free trade increases consumption and supply so everyone benefits in the end. So perhaps we can talk a little about the Transatlantic Trade and Investment Partnership (TTIP), the agreement to remove barriers between investment between the U.S. and the European Union. This is an important issue for the industry.
We should explain that generally for economies this is good for the wealth of countries; more trade is for everyone to be better off. I would like to talk a little about the TTIP concerns and opportunities, and what the agreement could imply for the industry. There is a lot of trade already between the EU countries and the United States.
The U.S. exports more to the EU than it imports from the EU. But it’s pretty balanced. Exports from the U.S. to Europe and imports to the U.S. from Europe are pretty much in line.
The produce industry in the U.S and Europe is very well integrated. There is a lot of trade going on already. The point is the TTIP, if it is signed, may further increase this trade. The last two aspects of this trade between the U.S. and Europe involve the level of tariffs and phytosanitary regulations and barriers for imports.
When you look at tariffs, they are very low already for fruits and vegetables. The average tariff level in the EU for fruits and vegetables is about 10 percent, and the average for the U.S. is only about five percent. If tariffs are eliminated, according to these levels, it will benefit U.S. exporters. However, when you look at the change in tariffs, that won’t generate a lot more trade. What really will generate more trade will be elimination of phytosanitary barriers.
Q: Would that have any impact on food safety?
A: No, phytosanitary rules involve procedures for keeping an insect or disease that doesn’t exist in an importing country out of that country or growing region. But there are rules and regulations that are different in Europe and the U.S.
In the context of the EU and the U.S. trade negotiations, the argument is phytosanitary barriers are the biggest and most costly obstacle to bilateral trade between the EU and U.S. The European claim is that barriers and regulations are much stricter and more costly in the U.S. than in Europe. The U.S. tends to operate what is called a closed import system.
Companies have to undergo lengthy procedures, applications for assessment; even sometimes it requires U.S. representatives to go to the export country to approve production and postharvest procedures to be acceptable in the U.S. For example, U.S. inspectors need to be flown into Europe to inspect shipments, at the European’s expense.
Usually, U.S. exporters to the EU have more lenient rules and procedures to get approval.
Q: It’s interesting the EU phytosanitary rules are more lenient than those in the U.S. I thought Europe was more aggressive than the U.S. on restricting certain types of pesticides and chemical use…
A: I think that is true. Europeans are concerned about pesticides yes, there are whole industries such as the export of McIntosh apples and Empire apples to the UK, where only two or three exporters will take the risk as the residue levels are so tough. On phyosanitary concerns, though, the US is perceived to be tougher. This is all part of the negotiations.
The TTIP focuses not only on decreasing levels of tariffs but also developing common phytosanitary procedures for trade. This is something I want to share with the audience, because it is important for the industry. On the one hand, Europeans are asking for a more common set of import/export rules for fruits and vegetables. They think that will help them export more to the U.S.
I think it is an advantage to both sides; the U.S. will benefit from lower tariffs, but at the same time, Europe will benefit from less costly procedures to export to the U.S.
Q: Is there any concern in relaxing the phytosanitary rules?
A: I don’t think so, quite honestly. Europe has a reliable produce industry.
Q: Why then has the U.S. had such trying phytosanitary rules and procedures for European trade to the U.S.?
A: When we think of trade agreements, our tariffs have come down to easing barriers to trade, and phytosanitary rules have become more important. I think it is hard to generalize; in some cases it may be of value to impose very strict regulations, but in other cases phytosanitary rules are used to protect the local industry from competition.
Q: That being said, is there some pushback from local industry concerned that the agreement could make it harder for them to compete?
A: Yes, of course. In some cases, it will lead to more competition, but you are protecting local industry at the expense of having higher prices for consumers. In the end, opening trade is better for the industry, consumers, and for society.
Q: Could you elaborate on the broader picture of global trade opening up?
A: I also would like to talk about how some countries are increasing their presence in international trade. They are doing things right, improving technology and infrastructure, and also signing trade agreements.
Mexico exports tomatoes to the U.S. and Canada year-round. Controlled agricultural techniques, shade houses/greenhouses are a very important development in parts of Mexico. Mexico had infrastructure limitations in the past and is catching up fast and providing products at very competitive prices to the international markets. Other countries fall into this scenario.
In the case of Peru, it has a fantastic infrastructure for postharvest and exports and has made huge investments in the ports to allow Peru to become a leading exporter of high value vegetables such as asparagus. These are countries, particularly Mexico and Peru, with the capacity to produce high quality products, complying with safety regulations of importing countries and becoming important players not only for exports to the U.S. and Europe but also increasingly exporting to Asia.
Q: How is this changing the competitive landscape?
A: This is important globally because if you look at regions such as the U.S., Canada or Europe, demand for fruits and vegetable consumption is not growing domestically. These countries are looking for places to export their products and need new markets.
There are new players developing very strong competitive advantages in some countries. The growing demand in Asia is generating change with suppliers in countries not traditionally strong in exports.
Q: Is there a risk of flooding the market with too much supply?
A: I don’t think so. I don’t think there is risk of excess supply because global demand is growing. Businesses just need to be strategic to capitalize on the growth and fill the gaps.
The produce industry is less likely to suffer from new players entering the global market, because it is much more integrated than many other sectors in the food sector that have higher barriers to trade. I think closing trade would be very bad for the industry, but I don’t think that’s realistic with fruits and vegetables when you have multinational companies in every continent in the world. More trade agreements will facilitate trade and allow consumers to have year-round fruits and vegetables.
Q: Since growing windows are limited for most locally grown produce items in different regions, global trade is necessary for year-round availability. Doesn’t this create a precedent for international trade agreements less urgent in many other industries?
A: There are a few examples of items like cabbage or potatoes you can put in storage, but in general, these are very fresh items, and even with storage, the products don’t have the same value, quality or nutritional content and they decay. The industry is highly seasonal so trade is essential.
As I was preparing this talk and working on these issues, I am so surprised how important Asia is as a source of demand for fruits and vegetables. I’m amazed how the businesses are shifting toward China in the produce industry. Five years ago, it was not that important. In the past 10 years, I’m really surprised in the shift, and the level of importance Asia is gaining with consumers for fruits and vegetables. They have very strong domestic industries, but I think there are many opportunities on tap for the U.S. in China, as well as in Latin America and Europe.
The other agreement I’ll mention is the Trans-Pacific Partnership (TPP). China is not a part of that. TTP is generating a lot of potential but we need another hour in my presentation to discuss that. With the new Trans-Pacific Partnership, it is estimated for the U.S. by 2024, vegetable exports will be higher by 20 percent and fruit exports will be higher by 25 percent. This illustrates how powerful these agreements are for the industry.
Q: What advice do you have for produce executives attending your talk on how to capitalize on this international trade growth, and to gain a competitive edge?
A: My first piece of advice: Businesses should look at the global picture, don’t forget how important these trade agreements are, and how they shed light on the future. Second, when looking at particular export markets, try to develop relationships with local farmers that know the distribution system in the importing country, especially because produce quality is so difficult to maintain and to judge.
So it’s important to build these contacts, certainly at the beginning. It’s good to have a strong importing partner in the initial stages. This is particularly crucial in Asia, and in countries where the infrastructure and transportation systems are not as developed.
Retailers are in unique position to tell the supply chain what areas have high demand, what fruits and vegetables are enticing consumers to buy more. Especially when producing from far away, the retailers play a key role in sharing marketing information to sell the right product at the right time of year.
Global standardization is the next stage. For instance, organic trade has incredible potential, and is poised to grow but the problem is the assurance issue. We need common organic certification everywhere. We have USDA certified organic and certain guidelines and rules, but we need to work on a common definition of what organic produce is to promote it internationally, but the demand is there. GlobalGAP and standardized food safety certifications and procedures of compliance and transparency remain a critical step in harmonizing international trade.
******
That more trade equals more prosperity is a truism among economists. And there is little doubt that the produce industry will be more prosperous if it can ship freely throughout the globe.
Yet, in the age of Trump and Brexit, it is not clear that even establishing that freer trade will boost GNP is sufficient to move forward with trade agreements, both on the table and proposed.
On the one hand, the concern is that this trade-induced rise in GNP may not, in fact, trickle down to unskilled or lower skilled laborers. Living in an advanced western economy was unique in that it provided opportunities for even unskilled people to make a decent living. Now the fear is that globalization, expressed via trade and immigration, make that harder to happen.
The other fear is that increased global prosperity sounds great in abstract, but whether it is really a good thing depends crucially on a political, not an economic, decision, which is: What do countries do with their increased prosperity?
Bringing, say, China into the global economy has increased prosperity on both sides, and some would argue that this economic integration is a force for peace – one is less likely to try to destroy a profitable trading partner.
Still, if China uses its greater prosperity to build islands in the South China Sea and cow its neighbors into expanded Chinese hegemony, if it uses its resources to build more and better nuclear weapons, then is it possible we would have been better off denying ourselves the fruits of trade in order to deny them the surplus to invest in these things?
So on a micro level, the course is clear: Produce companies should recognize that it is a global world and pursue all the opportunities out there. On a macro level, the pros and cons of free trade and free movement of peoples are the heart of modern political debate.
We hope you will join us at The London Produce Show and Conference to get a produce industry spin on these important discussions.
You can register for the event right here.
You can book hotel rooms here.
And get caught up on all the details of the event right here.
