STiR coffee and tea magazine

6 STiR coffee and tea / Issue 6, 2018 (December / January 2019) Representation for STIR Asia I Middle East I Africa Southern & Eastern Europe Glenn Anthony John October Inter Co. Ltd. Interchange 21 Bldg., Room 3225, 399 Sukhumvit Road 32nd Fl. Bangkok, 10110, Thailand Tel +662 660 3789, Fax +662 660 3881 Mobile +1 917 843 0000 or +66 818 299 409 gaj@octobermultimedia.com The Americas I Northern Europe Emerson Leonard Cardinal Media LLC 2 Glenfield, Barrington RI 02806 United States Tel +1 917 680 1050 edl@octobermultimedia.com Printing/Distribution overseen by: October Inter Co. Ltd. Distribution by: DHL Express International (Thailand) Ltd. Published by: October Multimedia Co., Ltd. Printed in Thailand By Dan Bolton Up Front 3 ON THE COVER *The "i" in STiR is the Flavourtech Spinning Cone Column that extracts and recovers volatile compounds using steam in a vacuum. [www.flavourtech.com] 1 COTECA Hamburg expands its 10-year success to Asia. [www.coteca-asia.com] 2 Probat celebrates 150th anniversary with symposium connecting markets. [www.probat.com] 3 UC Davis raises funds for coffee research. [coffeecenter.ucdavis.edu] 1 2 Trade remains a flash point between the US and China following Asia-Pacific trade talks in Papua New Guinea in November, signaling the rift is likely to escalate. Coffee and tea are among the 5,207 categories of US products China now taxes at 35%. In September the US began taxing $200 billion worth of Chinese goods at 10%, a rate that may rise to 25% in 2019. The next day China levied tariffs on $60 billion worth of imports from the US and vowed to "outlast" Washington D.C. in a trade war that has unsettled world markets. The value of goods the US imports from China is much greater than the value of US goods shipped to China. As a result, China included many agricultural products with relatively small trade value. Coffee and tea were among the items named. China's latest round of tariffs are assessed at two levels, 5% and 10%. This is on top of a previous tariff increase in July. The cumulative tax on processed coffee and tea crossing the Chinese border is now 35%. The greatest impact will be on coffee. In 2017 China imported $18 million worth of US coffee and $2.65 million worth of US tea, according to freight forwarding company Flexport which publishes import and export data sourced from US census statistical records. China is the world's largest tea producer and the largest exporter by value, earning $1.6 billion in 2017 from sales of mainly green tea. Since China is awash in tea, the country imported only $149 million worth in 2017, about 2% of global tea exports. Imports are increasing. In 2005 China imported less than $225,000 of US tea. China is now one of the top dozen countries that buy tea from the US. Canada is the largest US tea importer by far, purchasing approximately $75 million annually, a number that has increased by $50 million since 2005. Japan is the second largest importer of US tea, by value, at $6.9 million in 2017. Germany bought $5.3 million last year and Mexico, Korea, and Great Britain each purchase about $5 million annually. China Raises Import Duties on US Coffee and Tea to 35% Impact on US exporters Green coffee accounts for approximately 95% of value in coffee exports globally. Since the US produces very little green coffee for export the primary impact of the trade war are declining sales of fresh roast and premium soluble coffee. China is one of the fastest-growing coffee markets globally. Consumption has nearly tripled in the past four years with imports growing at 16% per year. The trend is toward higher quality arabica. China ranks a modest 14th globally in coffee imports, spending $521 million in 2017. A much less populated Japan ranks 5th, importing $1.4 billion worth of coffee last year, but imports are declining in Japan. The US buys $6.3 billion of the total $32.9 billion in global coffee exports and drinks it all, exporting 7.5% less during the period 2012-17. Levying a 35% tariff on $18 million in sales means customers in China will pay at least $6.3 million more for US coffee imports in 2019, placing roasters at a competitive disadvantage compared to identical coffee imported from Canada, Europe, or South American suppliers. This is compounded by the fact that China aggressively reduced tariffs by about a third in the past few years, and eliminated several non-tariff barriers to trade, inviting closer relations with Europe, a dominate player in solubles. European countries import less than 10% of China's tea exports but that percentage is growing. Phil Hogan, EU commissioner for agriculture and rural development, traveled to Shanghai and Shenzhen last spring attesting to the "strong desire of many European companies to build stronger business and trade relationships with their Chinese counterparts for their mutual benefit," he said. China is the second largest importer of EU agricultural products, valued at $21 billion in 2017. Many countries running trade deficits with China are pursuing expanded market access as China seeks to diversify import channels in response to the US trade conflict. In July China lowered duties on tea imports from India, South Korea, Bangladesh, Laos, and Sri Lanka by half to 7.5%. COFCO, China's government-owned tea company, subsequently struck a $1 million deal with Jay Shree Tea to buy Indian black tea. US tea importers and wholesalers think it "highly unlikely" that the US will tax Chinese tea. Doing so will not generate significant revenue. A 10% tax would not discourage imports, but US President Donald Trump's threat to tax $250 billion of Chinese imports at 25% is a wildcard. Aaron Vick, senior tea buyer at The G.S. Haly Co., a tea importer located in Redwood City, Calif., says "Since the U.S. has no tea growing/producing industry to compete commercially with China, any tariff imposed on Chinese tea would not be protective [as the administration purports these actions to be] but rather, a transparently punitive attack on a culturally iconic product that embodies Chinese national pride."

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