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San Diego Plant andFlower Auction

A Strategy for Opening the Japanese Market
 to U.S. Cut Flower Exports

Coalition Against Agricultural Barriers to Trade
(CAABT)

Presented by Heather Grell
MA in Commercial Diplomacy

December 27, 1998

Monterey Institute for International Studies

 

This paper was researched and written to fulfill the M.A. project requirement for completing the Monterey Institute of International Studies’ Master of Arts in Commercial Diplomacy. It was not commissioned by any government or other organization. The views and analysis presented are those of the student alone. Names of people, corporations, businesses and governments are used only as examples in fictitious sample correspondence, statements, etc. in order to depict a realistic, albeit fictional, scenario. This does not represent any knowledge of these examples, nor does it in any way represent an endorsement by an individual, corporation, business or government.

For more information about the Commercial Diplomacy program and the M.A. project requirement, please visit www.commercialdiplomacy.org.

© December 1998 Heather Grell


 

EXHIBITS

Exhibit 1: Market Share in U.S. Domestic Cut-Flower Market

Exhibit 2: Value of Floricultural Imports By Country 1994-96

		to the United States			

Exhibit 3: Total U.S. and Australian Global Cut Flower Exports	

Exhibit 4: Total Cut-Flower Imports to Japan			

Exhibit 5: World Consumption of Flowers and Plants

		Per Capita and Market Size			

Exhibit 6: Sample Letter to Cut-Flower Industry			

Exhibit 7: Sample Letter to Agricultural Community	

Exhibit 8: Sample USDA/USTR Letter			

Exhibit 9: Fact Sheet, Information for every decision maker

Exhibit 10: Sample "Dear Colleague Letter"			

Exhibit 11: Congressional Testimony				

Exhibit 12: Potential California Legislative Support		

Exhibit 13: Potential Congressional Support 		

Exhibit 14: Total 1997 U.S. Cut Flower Production (By state)

Exhibit 15: Sample Press Release - American Cut-Flower 

	Growers Mount Surprise Attack on Japanese Growers

Exhibit 16: Sample Press Release - Congress Loses Patience 

        With Japanese Government				

Exhibit 17: Sample Q&A					

Exhibit 18: Sample Letter to the Editor			

Exhibit 19: Sample Letter to Australian Growers		

Exhibit 20: Sample Letter to the Japanese Cut-Flower Industry	

Exhibit 21: Sample Press Release - U.S. and Japanese

	Consumers and Producers Unite			

Exhibit 22: Estimated Financial Information		

Exhibit 23: Proposed Timeline			


 Scenario

In response to increasing competition in the domestic cut-flower market, the Flower Marketing Cooperative (SDPF) began exporting cut flowers to Japan in 1996. Just one year later, SDPF abruptly terminated its export program because numerous shipments had been delayed and damaged or completely destroyed by Japan 's customs process for agricultural imports. SDPF simply could not continue to bear theses losses.

For the purposes of this project, I assume the fictitious role of a consultant hired by the SDPF to develop a strategy for breaking down barriers to trade in cut flowers and other agricultural products.

SDPF grower members will need to endorse the strategy before it is implemented.


executive summary

TO: THE FLOWER MARKETING COOPERATIVE
FROM: HEATHER GRELL
SUBJECT: PROPOSAL FOR 1999 STRATEGY
DATE: MAY 5, 2000

This proposal lays out a strategy for prompting Japan to lower its sanitary phytosanitary (SPS) and other market access barriers to imports of cut flowers. Because the Flower Marketing Cooperative's (SDPF's) resources are limited, a Grassroots Coalition Strategy is recommended.

The strategy takes a two-track approach. It provides 1) commercial options for increasing the chances of successful entry into the Japanese market given Japan 's current customs practices, and 2) a policy strategy for pressuring Japan to change its customs procedures and lower its agricultural trade barriers.

Track 1: Commercial Options. These options provide immediate actions that SDPF can take to overcome market access barriers in Japan . These options do not require any change in Japanese policy. They include:

  • Utilizing the expertise of Japanese freight forwarders and distributors.

  • Adopting and developing technology to meet Japanese SPS requirements.

  •  Using USDA Market Access Program funding to promote American cut flowers in Japan .

  • Requesting USDA funding to establish a pilot pre-inspection program.

Track 2: Policy Strategy. The goal of the policy strategy is to pressure U.S. and foreign government officials to take action on behalf of cut-flower growers who wish to export to Japan . The strategy calls for building a Coalition Against Agricultural Barriers to Trade (CAABT) that will 1) build domestic and international awareness of how Japan's trade barriers affect all agricultural producers that export to Japan, and 2) request that local, state, national, and foreign government officials do their part in persuading Japan to reduce barriers to agricultural trade.

· Coalition Building - A three-tier coalition will be established at the local, national and international level to address Japanese agricultural trade barriers. The Coalition Against Agricultural Barriers to Trade (CAABT) will work in coordination with a national committee (the National Committee of Agricultural Associations Against Barriers to Trade). An international coalition (the International Coalition Against Agricultural Barriers to Trade or ICAABT) will include American and international agricultural exporters and interest groups; it will create international awareness of Japan 's discriminatory customs practices for agricultural products.

· Legislative Strategy - The legislative strategy is aimed at persuading local, state, national and foreign governments to participate in addressing agricultural trade barriers. In the first year, CAABT's legislative goal will be to form a congressional committee that will investigate agricultural barriers to trade and prompt the Administration to initiate bilateral negotiations with Japan on the cut-flower issue.

· Media Strategy - CAABT will use free and paid media instruments, such as letters to the editor, news reports and advertisements to increase awareness of how local U.S. communities benefit from U.S. agricultural exports to Japan and how Japanese trade barriers curtail those benefits. Media visibility will help build support for negotiations between Japan and the United States .

· Negotiation Strategy - CAABT can assist trade officials in planning for negotiations between the United States and Japan . Accordingly, the strategy sets forth objective criteria for the negotiation, as well as preferred outcomes and best alternatives to a negotiated agreement (BATNA). If bilateral negotiations fail, the recommended BATNA for CAABT is to request that USTR initiate dispute settlement proceedings in the World Trade Organization.

· International Strategy - ICAABT will utilize media and legislative tools in order to generate international awareness of Japan 's agricultural trade barriers and put pressure on Japan to liberalize its agricultural import regime.


 Background 


MARKET INFORMATION

The World Market

The global cut-flower industry is changing. Although it was long dominated by the Netherlands , it is now a more international market, with countries such as South Korea , Colombia , Ecuador , Zambia , and Kenya all competing. There are currently twenty-six major floriculture-producing countries, fifteen of which account for 75.6 percent of global consumption. In 1997, total global cut-flower consumption was $44.6 billion, and world cut-flower markets are expected to maintain current annual growth rates of six to nine percent.

Japan is now the world’s largest cut-flower producer. The Netherlands and United States are respectively the second and third largest. These three countries account for more than half of worldwide wholesale value but represent only 20 percent of all cut-flower land in production. Emerging countries, such as Ecuador and Kenya , have demonstrated efficient production capabilities for low-end, cheap flowers, while others, such as Australia and Colombia , have exploited their production experience and unique climates to gain entrance into niche markets around the world. In 1997, the leading consuming countries were the United States ($14.6 billion), Germany ($7.6 billion) and Japan ($5.4 billion) (see Exhibit 5). The countries with the highest per capita cut-flower consumption include Switzerland , Norway , Austria and Germany (see Exhibits 2-5).

The United States

A. The Domestic Market

The United States is a net importer of floriculture products, particularly cut flowers and potted plants. In 1996, U.S. consumers spent $8.2 billion on cut flowers, but U.S. domestic floriculture wholesale sales were just $3.57 billion. In 1997, California , Florida , Michigan , Texas and Ohio accounted for 54 percent of total production, with California leading at $746 million (plants and flowers).

Over the last ten years, U.S. flower growers have faced increasing domestic competition from foreign producers, and domestic prices have been stagnant. During parts of the year, U.S. flower growers are forced to leave crops in the field because domestic prices do not cover harvest costs. And the domestic market is expected only to get worse. In May 1998, Dole invested in the U.S. supermarket flower business by purchasing the largest U.S. flower marketer and the largest U.S. grower. These two Miami-based flower companies import directly from Mexico , Colombia and Ecuador on a daily basis, and Dole plans to invest heavily in promoting Dole brand recognition (see Exhibit 1). The acquisition will increase U.S. domestic competition and highlights the need for American cut-flower growers to target international markets.

B. Export Prospects

Before Latin American producers increased their production volumes and began to supply significant cut-flower shipments to the United States , U.S. producers faced little serious competition; they did not need to look beyond U.S. boundaries for alternative markets. Today, however, U.S. producers are unable to compete against imports of staple flowers (such as roses and carnations) from countries with large, cheap, labor forces. Instead, U.S. producers are beginning to focus production in harder to grow specialty flowers that flourish in U.S. microclimates like San Diego ’s.

U.S. producers are particularly interested in entering the Japanese market because Japanese consumers demand and pay a premium price for these specialty flowers. And American growers have certain advantages over others in the specialty flower market. In addition to having good microclimates, U.S. growers benefit from cheaper wages and freight to Asia than their European competitors. U.S. cut-flower producers also operate without subsidies and preferential treatment, whereas Dutch production is highly subsidized and Colombian producers have enjoyed preferential access to the U.S. market.

The problem is that U.S. producers do not have effective access to Japan ’s market. While Japanese floriculture sales were $5.4 billion in 1996, U.S. exports to Japan were just $4.5 million—a miniscule portion of Japanese sales and less than ten percent of the United States ’ total cut-flower exports (see Exhibits 3, 4 and 5).

Australia , the Netherlands and Colombia have established in-country, pre-inspection procedures that facilitate inspection and delivery to Japan . The protocols allow exporters to reduce costs and increase shipment export volumes to Japan . However, cut-flower exports to Japan from these three countries total approximately $66 million. The United States ’ exports to Japan of $4.5 million do not justify the cost of a pre-shipment inspection program, which can reach $45,000 per month. 

C. Trade Policy
Imports

All imported floricultural products enter the United States duty free. The Plant Protection Quarantine (PPQ) staff of the Animal Plant and Health Inspection Service (APHIS) inspects plant and plant product imports to ensure that pests and diseases that could threaten U.S. production are not inadvertently imported. The United States ’ inspection of imported plants and plant products is transparent and based on sound scientific standards.

Exports

To aid American farmers and exporters in commodities trading, PPQ also inspects plants and plant-product exports. Many countries require APHIS to issue phytosanitary certificates for plant and plant-product exports to ensure the exports do not pose a threat to the import market’s production.

Japan

Japanese cut-flower production and consumption have been stagnant over the last ten years. Increasing production costs, declining prices, and the success of mass marketers have forced Japanese growers to rethink production and marketing techniques. Since the Japanese recession began in 1993, cut-flower prices have dropped 30 percent, creating greater pressure on cut-flower growers than other floriculture sectors in Japan .

However, because higher subsidies are available for floriculture production, Japanese citrus and rice farmers are switching production to floriculture crops. Since 1994, the total Japanese land under flower production has increased by 403 acres. High subsidies on cut flowers motivate Japanese producers to continue production, despite low domestic returns. The high cost of production in Japan has led to retail prices higher than import prices. Less-expensive imports threaten Japan ’s subsidized production and create resentment and a refusal to address trade barrier concerns.

A. The Domestic Market

According to FloraCulture International, the Japanese flower and plant market is worth $5.4 billion, and U.S. cut-flower imports represent less than one percent of this total. In 1996, total cut-flower imports to Japan were $170 million or 3.1 percent of the entire Japanese cut-flower market.

Japanese consumers demand high quality flowers that are presented well—and this further increases Japan ’s already high flower prices. Flowers that sell for $1.75 wholesale in a large bunch in the United States , sell for $5 per bunch of ten stems in Japan . Japan’s higher wholesale market prices are large enough to offset export costs, meaning that U.S. producers benefit from Japanese sales because Japan provides an outlet for flowers that might otherwise be left in the field.

Roses and carnations are sold in Japan , but the country has a large demand for specialty, high-end flowers. Japanese consumers are attracted to Asian-looking flowers such as the native Australian waxflower and protea—flowers that also grow well in microclimates found in California . Nonetheless, non-transparent, costly and lengthy customs procedures have made the Japanese market less attractive to U.S. exporters. A U.S. flower producer has estimated that Japan could become a $40 million market for U.S. growers. However this will not happen unless Japan decreases its unfair barriers to trade in cut flowers.

B. Trade Policy
Custom Procedures

Despite sound scientific evidence that certain pests are cosmopolitan (common to both the United States and Japan ), Japan continues to restrict imports of many U.S. fresh horticultural products that harbor these pests. Shipments of fresh horticultural products infested with live insects are subject to fumigation, regardless of whether the pests are cosmopolitan. And these fumigation practices, as well as the lengthy SPS inspection process itself, damage the quality of delicate fresh products once shipments arrive in Japan .

Standards and Testing
Japan falls well short of other countries’ progress in improving customs clearance procedures. The United States and Japan continue to discuss the problem, but Japan ’s current SPS technologies and testing procedures are still not justifiable by scientific standards.

Australia
With a retail value estimated at $350 million, Australian production represents less than one percent of global flower production.

Australian cut-flower producers export $15-20 million annually, and 80 percent of this figure are native variety shipments to Japan .

Worldwide production of native Australian varieties is estimated at $400 million wholesale. Production in Australia accounts for $85 million of this total. While Australian production represents only 10 percent of global native and exotic protea, Australia produces an estimated 30 percent of all waxflowers in the world. Major export markets for Australian waxflowers and protea growers include Japan , the United States , Europe , Canada , Hong Kong , Italy , South East Asia and New Zealand .

Australia has succeeded in exporting to Japan by establishing extensive export and quarantine protocols with Japan . These protocols, which include pre-shipment inspection and other quarantine measures, have proven successful for large volume shipments. Australian producers have also invested heavily in technology that ensures that flowers experience minimum damage during shipment.

The Japan Cut Flower Importer’s Association (JCIA) predicts that Japanese demand for Australian varieties will remain strong. The 1997 JCIA five-year forecast for Australian floriculture exports predicts increasing demand in several markets:

North Asia 9.0%
South Asia 15.0
Europe 6.0
North America 8.0
Other markets 10.0
Global Average 9.6


RECENT U.S.-JAPAN WTO DISPUTE PANEL RULING ON JAPAN ’S AGRICULTURAL IMPORT REQUIREMENTS

On November 18, 1997 , a WTO panel was formed to hear U.S. complaints against Japan ’s varietal testing requirements for apples, cherries, nectarines and walnuts. The United States claims that these testing requirements are inconsistent with the WTO SPS Agreement, which requires that SPS measures be based on sound scientific principles and an explicit risk assessment. Japan requires that each variety for each commodity undergo separate testing for certain quarantine treatments. The panel ruled that Japan’s varietal testing and quarantine requirements 1) ignore scientific evidence that demonstrates the efficiency of existing international quarantine treatments for a commodity, and 2) result in serious market access delays for exports.

9.1 In light of the findings, we reach the conclusion that Japan

(i) by maintaining the varietal testing requirement in dispute with respect to

apples, cherries, nectarines and walnuts, acts inconsistently with its obligation under Article 2.2 of the SPS Agreement not to maintain phytosanitary measures "without sufficient scientific evidence, except as provided for in paragraph 7 of Article 5"; and

                                                                                i.            by maintaining the varietal testing requirement in dispute with respect to apples, cherries, nectarines and walnuts, acts inconsistently with its obligation in Article 5.6 of the SPS Agreement to "ensure that [its phytosanitary] measures are not more trade-restrictive than required to achieve [Japan's] appropriate level of phytosanitary protection, taking into account technical and economic feasibility";

                                                                            iii.            by not having published the varietal testing requirement in dispute with respect to any of the products at issue, acts inconsistently with its obligations under paragraph 1 of Annex B of the SPS Agreement and, for that reason, with its obligations contained in Article 7 of that Agreement.

1.      Since Article 3.8 of the DSU provides that "[i]n cases where there is an infringement of the obligations assumed under a covered agreement [including the SPS Agreement], the action is considered prima facie to constitute a case of nullification or impairment", we conclude that to the extent Japan has acted inconsistently with the SPS Agreement it has nullified or impaired the benefits accruing to the United States under the SPS Agreement.

2.      We [the WTO panel] recommend that the Dispute Settlement Body request Japan to bring its measure in dispute into conformity with its obligations under the SPS Agreement.

Japan has appealed the panel’s ruling, and an appellate report is due sometime in 1999. Nonetheless, this ruling supports the cut-flower industry’s claim that Japan maintains a non-transparent customs system that restricts trade flows of fresh produce. The panel’s conclusions also state that Japan ’s SPS measures are not based on sound science and that Japan should update its SPS regulations to meet international practices.


1Flower Export Council of Australia Inc., Industry Summary (http://www.iinet.net.au/~feca/industry.htm).

2Flower Export Council of Australia Inc., Industry Summary (http://www.iinet.net.au/~feca/industry.htm).

3World Floriculture By the Numbers. FloraCulture International. March 1997: 30-31.

4Doyle Johnson, "Green Industry Grower Receipts To Exceed $11 Billion," Agricultural Outlook, July 1997: 9-10.

5U.S. Department of Agriculture, National Agricultural Statistics Service, Agricultural Statistics Board. April 1998. Floriculture Crops 1997 Summary Sp Cr 6-1 (4-98). Washington , D.C. : U.S. Government

6Kravetz, Stacy. (1998, July 6). King of Pineapples Tiptoes to Tulips for Faster Growth. Wall Street Journal: A17.

7UN Trade Statistics. http://untrade.fas.usda.gov/appscripts/untrade/unreport.exe); "World Floriculture By the Numbers," FloraCulture International, March 1997: 30-31.

8U.S. Department of Agriculture, Foreign Agriculture Service. U.S. Government. July 1998.

9Japan’s Growers Look to the Future. FloraCulture International. April 1997: 14-21.

10UN Trade Statistics. http://untrade.fas.usda.gov/appscripts/untrade/unreport.exe

11United States Trade Representative. 1998. 1998 National Trade Estimate Report on Foreign Trade Barriers. 193-243. Washington , D.C. : U.S. Government.

12United States Trade Representative. 1998. 1998 National Trade Estimate Report on Foreign Trade Barriers. 193-243. Washington , D.C. : U.S. Government.

13Flower Export Council of Australia Inc., Industry Summary, http://www.iinet.net.au/~feca/industry.htm

14Japan’s Growers Look to the Future. FloraCulture International. April 1997: 14-21.
   World Floriculture By the Numbers. FloraCulture International. March 1997: 30-31.

15United States Trade Representative. 1998. 1998 National Trade Estimate Report on Foreign Trade Barriers. 193-243. Washington , D.C. : U.S. Government.

16World Trade Organization. Japan – Measures Affecting Agricultural Products Report of the Panel (WT/DS76/R 27 October 1998)

17World Trade Organization. Japan – Measures Affecting Agricultural Products Report of the Panel
(WT/DS76/R 27 October 1998)

 

SDF's Attempts to Export to Japan 

The Flower Marketing Cooperative (SDPF) was founded in Carlsbad , California in 1982 and is the only cut-flower grower cooperative in California . It currently has 47 grower members and is modeled after a Dutch auction house that makes flowers available each morning to local retailers/wholesalers before other commercial buyers. Minimum bids per flower are set before the open bidding process begins. Growers use the auction as a clearinghouse for excess flowers that have not found a commercial market.

The SDPF does not maintain an exclusive agreement with growers; members are free to sell their flowers outside the cooperative. SDPF growers sell more than 200 different flower varieties, with annual sales of approximately $3.3 million. SDPF sells ninety percent of its flowers within the state of California . The remaining ten percent are sold elsewhere in the United States .

SDPF members began to consider exporting to Japan when increased domestic competition reduced its domestic market share and forced prices down. Because it had little export experience, it worked with Florimex, a multinational, fresh-floriculture wholesale company.

Because of the popularity of native Australian varieties in Japan , Florimex approached SDPF about exporting waxflowers and protea, varieties that are well suited to San Diego ’s microclimate. In November 1996, SDPF attempted its first export to Japan . SDPF shipped waxflowers and protea, as well as pincushions and birds of paradise. Australian producers had been searching for off-season production to maintain demand in Japan for these varieties. Moreover, Japanese retailers had been searching for guaranteed supply and were pleased to work with U.S. growers.

During 1996, SDPF exported nine weekly shipments to Japan . However, when these shipments failed to move through customs in a timely manner, their shelf-life and quality were dramatically reduced. Indeed, even after SDPF established an alliance with Federal Express (which reduced shipment times from seven to five days), shipments were still delayed long enough that their quality degraded as Japanese freight forwarders were moved ahead of SDPF’s shippers. Moreover, because pests were detected, Japanese customs officials required entire shipments to be treated with methyl bromide, which further damaged product quality. Each SDPF shipment incurred heavy losses.

SDPF decided to continue their export efforts a second year because the shipments yielded a reasonable return even after deductions for losses and Japanese retailers were enthusiastic to receive the flowers. But when Japanese customs officials destroyed the entire first two 1997 shipments because they did not meet Japan ’s stringent SPS requirements, SDPF decided to cease exporting completely.

SDPF did not lodge a complaint with either the United States or Japanese government. However, the California Farm Bureau in San Diego arranged for Chris Goldwaite of the Foreign Agricultural Service to meet local San Diego producers concerning their experiences exporting to Japan . Goldwaite determined that FAS should investigate how it could assist U.S. plant and flower exporters.

SDPF faced the following four market access obstacles in Japan :

  • Transparency: Upon arrival in Japan , SDPF’s shipments were subject to lengthy, non-transparent inspection and clearance delays. The Japanese government does not publish its rules and procedures for shipments of flowers from the United States .
  • Consistency: Japan ’s SPS inspection rules changed so frequently that quarantine treatments seemed arbitrary.
  • Timeliness: Japan ’s unclear quarantine procedures and its preferential treatment of Japanese freight forwarders resulted in protracted delays of SDPF’s shipments.
  • Standards: Under the WTO SPS Agreement, Japan is allowed to set its own SPS measures based on sound scientific standards. However, Japan ’s quarantine treatments are excessive and ignore actual pest risk to Japanese production.

Japan is renown for its zero tolerance SPS policies—policies that apply despite the minimal risk some pests present to the Japanese agriculture industry. Japan also conducts discriminatory port of entry inspections. The result is costly delays that destroy product quality while shipments wait for clearance on the tarmac. The powerful Japanese Agricultural Lobby supports Japan ’s non-transparent customs procedures in order to restrict foreign product entry into the country.

Japanese customs’ institutionalized preferential practices and the country’s protected internal distribution channels further impeded SDPF from penetrating the Japanese market.


18Florimex was established in 1925 and has offices around the world. Florimex specializes in developing quality sourcing and coordinating international shipment logistics and delivery services for floriculture products, including cut flowers. Florimex maintains ties with cut-flower producers and retailers around the globe.

White Paper 

The Japanese cut-flower market represents a potentially lucrative market for American cut-flower growers. However U.S. exporters have not succeeded in entering this market because of Japan ’s lengthy inspection processes and excessive and unjustifiable sanitary and phytosanitary (SPS) measures. Stringent Japanese agricultural inspection and customs policies make it extremely difficult to get delicate fresh products to market before their quality deteriorates.

During the last ten years, the U.S. domestic supply of cut flowers increased and prices stagnated as cheap Latin American imports flooded the market. Farmers have been forced to leave product in the field because market prices do not cover harvest costs. In order to survive, U.S. cut-flower growers have begun to explore niche export markets that command higher prices than domestic markets. One U.S. flower producer estimates that the Japanese market could represent a $40 million market for the United States if Japan brings its agricultural inspection and customs regime into compliance with World Trade Organization (WTO) agreements. U.S. cut-flower exports in 1996 were just $47 million.

The Japanese consumer is attracted to "Asian" looking flowers, such as the waxflower and protea which are Australian native varieties. These varieties grow well in microclimates in Australia and California . A large bunch of these flowers sells for $1.75 wholesale in the United States but a bunch of just ten stems goes for $5 in Japan . The profit margin easily off-sets export costs if U.S. cut-flower exporters are allowed fair and transparent access to the Japanese market.

In 1997, Japan consumed a total of $5.4 billion in cut flowers. Total world cut-flower imports to Japan were $170 million or only 3.1 percent of the entire Japanese cut-flower market.

Under the WTO SPS Agreement, countries are allowed to set their own SPS measures based on sound scientific standards. Japan ’s agricultural import regime, however, is not based on sound scientific evidence, and its SPS measures are excessive and non-transparent. Shipments of fresh horticultural products infested with live insects are subject to product damaging fumigation even when pests are cosmopolitan to Japan and, therefore, do not represent a serious threat to the country’s agricultural industry. Moreover, Japan ’s discriminatory customs procedures result in unjustified delays in shipments—delays that are disastrous for limited shelf-life agricultural products. Japan ’s practices prevent U.S. exporters from providing the high quality flowers the Japanese market demands.

In response to lengthy and expensive Japanese varietal testing requirements, U.S. apple, cherry, nectarine and walnut exporters recently initiated a WTO dispute settlement proceeding. Rather than accepting and applying the results for one fruit variety to all varieties, the Japanese require every variety to undergo separate SPS testing.

In October 1998, the WTO dispute panel ruled against Japan . The panel concluded that Japan was violating several principles of the SPS Agreement, including the transparency principle. It also found that Japan ’s SPS measures were not based on sufficient scientific evidence. The panel recommended that " Japan bring its measures into conformity with its obligations under the SPS Agreement."

This ruling sets a precedent that should aid U.S. cut-flower growers in opening Japanese markets. However, the panel ruling will not open the Japanese market by itself. The long-term answer to the cut-flower situation is government involvement. Without government participation, it is unlikely that Japan will lower its barriers to cut-flower imports in a timely manner—if at all. The United States government needs to engage Japan in bilateral negotiations to address barriers to cut-flower trade and to develop options for resolving the disputed barriers.

There is no question that American producers are well equipped to compete in Asian and global cut-flower markets. American producers are better equipped to compete in Japan than are European producers. American growers pay cheaper wages and freight costs to Asia than European producers. They also benefit from microclimates that are well suited to production of various non-mainstream flower varieties that are in great demand in Asian markets.

Given that the global cut-flower market is expected to continue to grow at a rate of six to nine percent per year, American producers could well succeed in significantly expanding their businesses in the coming years. American flower producers will only continue to struggle to get by, however, if lucrative markets like the Japanese market are inaccessible due to unfair trade barriers.

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