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
to increasing competition in the domestic cut-flower market, the Flower
Marketing Cooperative (SDPF) began exporting cut flowers to
in 1996. Just one year later, SDPF
abruptly terminated its export program because numerous shipments had been
delayed and damaged or completely destroyed by
's customs process for agricultural
imports. SDPF simply could not continue to bear theses losses.
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.
members will need to endorse the strategy before it is implemented.
TO: THE FLOWER MARKETING COOPERATIVE
FROM: HEATHER GRELL
SUBJECT: PROPOSAL FOR 1999 STRATEGY
DATE: MAY 5, 2000
proposal lays out a strategy for prompting
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.
takes a two-track approach. It provides 1) commercial options for
increasing the chances of successful entry into the Japanese market given
's current customs practices, and 2) a
policy strategy for pressuring
to change its customs procedures and
lower its agricultural trade barriers.
Commercial Options. These options provide immediate actions that SDPF can
take to overcome market access barriers in
. These options do not require any change
in Japanese policy. They include:
the expertise of Japanese freight forwarders and distributors.
and developing technology to meet Japanese SPS requirements.
USDA Market Access Program funding to promote American cut flowers in
USDA funding to establish a pilot pre-inspection program.
Policy Strategy. The goal of the policy strategy is to pressure
and foreign government officials to take
action on behalf of cut-flower growers who wish to export to
. 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.
- 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
's discriminatory customs practices for
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
on the cut-flower issue.
Strategy - CAABT will use free and paid media instruments, such as letters
to the editor, news reports and advertisements to increase awareness of
communities benefit from
agricultural exports to
and how Japanese trade barriers curtail
those benefits. Media visibility will help build support for negotiations
Negotiation Strategy - CAABT can assist trade officials in planning for
negotiations between the
. 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
's agricultural trade barriers and put
to liberalize its agricultural import
cut-flower industry is changing. Although it was long dominated by the
, it is now a more international market,
with countries such as
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.
is now the world’s largest cut-flower
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
, have demonstrated efficient production
capabilities for low-end, cheap flowers, while others, such as
, 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
($7.6 billion) and
($5.4 billion) (see Exhibit 5). The
countries with the highest per capita cut-flower consumption include
(see Exhibits 2-5).
is a net importer of floriculture
products, particularly cut flowers and potted plants. In 1996,
consumers spent $8.2 billion on cut
domestic floriculture wholesale sales
were just $3.57 billion. In 1997,
accounted for 54 percent of total
leading at $746 million (plants and
last ten years,
flower growers have faced increasing
domestic competition from foreign producers, and domestic prices have been
stagnant. During parts of the year,
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
supermarket flower business by purchasing
flower marketer and the largest
grower. These two Miami-based flower
companies import directly from
on a daily basis, and Dole plans to
invest heavily in promoting Dole brand recognition (see Exhibit 1). The
acquisition will increase
domestic competition and highlights the
need for American cut-flower growers to target international markets.
American producers increased their production volumes and began to supply
significant cut-flower shipments to the
producers faced little serious
competition; they did not need to look beyond
boundaries for alternative markets.
producers are unable to compete against
imports of staple flowers (such as roses and carnations) from countries
with large, cheap, labor forces. Instead,
producers are beginning to focus
production in harder to grow specialty flowers that flourish in
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,
growers benefit from cheaper wages and freight to
than their European competitors.
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
producers do not have effective access to
’s market. While Japanese floriculture
sales were $5.4 billion in 1996,
were just $4.5 million—a miniscule
portion of Japanese sales and less than ten percent of the
’ total cut-flower exports (see Exhibits
3, 4 and 5).
have established in-country,
pre-inspection procedures that facilitate inspection and delivery to
. The protocols allow exporters to reduce
costs and increase shipment export volumes to
. However, cut-flower exports to
from these three countries total
approximately $66 million. The
’ exports to
of $4.5 million do not justify the cost
of a pre-shipment inspection program, which can reach $45,000 per month.
floricultural products enter the
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
production are not inadvertently
’ inspection of imported plants and
plant products is transparent and based on sound scientific standards.
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.
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
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
has led to retail prices higher than
import prices. Less-expensive imports threaten
’s subsidized production and create
resentment and a refusal to address trade barrier concerns.
FloraCulture International, the Japanese flower and plant market is worth
$5.4 billion, and
cut-flower imports represent less than one percent of this total. In
1996, total cut-flower imports to
were $170 million or 3.1 percent of the
entire Japanese cut-flower market.
consumers demand high quality flowers that are presented well—and this
’s already high flower prices. Flowers
that sell for $1.75 wholesale in a large bunch in the
, sell for $5 per bunch of ten stems in
. 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.
carnations are sold in
, 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
. Nonetheless, non-transparent, costly and lengthy customs procedures
have made the Japanese market less attractive to
flower producer has estimated that
could become a $40 million market for
growers. However this will not happen
decreases its unfair barriers to trade in
sound scientific evidence that certain pests are cosmopolitan (common to
continues to restrict imports of many
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
falls well short of other countries’
progress in improving customs clearance procedures. The
continue to discuss the problem, but
’s current SPS technologies and testing
procedures are still not justifiable by scientific standards.
With a retail value estimated at $350
million, Australian production represents less than one percent of global
cut-flower producers export $15-20 million annually, and 80 percent of
this figure are native variety shipments to
production of native Australian varieties is estimated at $400 million
wholesale. Production in
accounts for $85 million of this total.
While Australian production represents only 10 percent of global native
and exotic protea,
produces an estimated 30 percent of all
waxflowers in the world. Major export markets for Australian waxflowers
and protea growers include
South East Asia
has succeeded in exporting to
by establishing extensive export and
quarantine protocols with
. 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.
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
Other markets 10.0
Global Average 9.6
RECENT U.S.-JAPAN WTO DISPUTE PANEL
’S AGRICULTURAL IMPORT REQUIREMENTS
November 18, 1997
, a WTO panel was formed to hear
’s varietal testing requirements for
apples, cherries, nectarines and walnuts. The
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
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
(i) by maintaining
the varietal testing requirement in dispute with respect to
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
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";
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.
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
We [the WTO panel] recommend
that the Dispute Settlement Body request
to bring its measure in dispute into
conformity with its obligations under the SPS Agreement.
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
maintains a non-transparent customs
system that restricts trade flows of fresh produce. The panel’s
conclusions also state that
’s SPS measures are not based on sound
science and that
should update its SPS regulations to meet
1Flower Export Council of Australia Inc., Industry Summary
2Flower Export Council of Australia Inc., Industry Summary
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).
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.
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.
12United States Trade Representative. 1998. 1998 National
Trade Estimate Report
on Foreign Trade Barriers.
13Flower Export Council of Australia Inc., Industry
14Japan’s Growers Look to the Future. FloraCulture
International. April 1997: 14-21.
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.
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
Marketing Cooperative (SDPF) was founded in
in 1982 and is the only cut-flower grower
. 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.
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
. The remaining ten percent are sold
elsewhere in the
began to consider exporting to
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.
the popularity of native Australian varieties in
, Florimex approached SDPF about exporting
waxflowers and protea, varieties that are well suited to
’s microclimate. In November 1996, SDPF
attempted its first export to
. 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
for these varieties. Moreover, Japanese
retailers had been searching for guaranteed supply and were pleased to
SDPF exported nine weekly shipments to
. 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.
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
’s stringent SPS requirements, SDPF
decided to cease exporting completely.
SDPF did not
lodge a complaint with either the
or Japanese government. However, the
California Farm Bureau in
arranged for Chris Goldwaite of the
Foreign Agricultural Service to meet local
producers concerning their experiences
. Goldwaite determined that FAS should
investigate how it could assist
plant and flower exporters.
the following four market access obstacles in
Upon arrival in
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
SPS inspection rules changed so frequently that quarantine treatments
unclear quarantine procedures and its preferential treatment of
Japanese freight forwarders resulted in protracted delays of SDPF’s
Under the WTO SPS Agreement,
is allowed to set its own SPS measures based on sound scientific
quarantine treatments are excessive and ignore actual pest risk to
is renown for its zero tolerance SPS
policies—policies that apply despite the minimal risk some pests present
to the Japanese agriculture industry.
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
’s non-transparent customs procedures in
order to restrict foreign product entry into the country.
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.
cut-flower market represents a potentially lucrative market for American
cut-flower growers. However
exporters have not succeeded in entering
this market because of
’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
last ten years, the
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,
cut-flower growers have begun to explore niche export markets that
command higher prices than domestic markets. One
flower producer estimates that the
Japanese market could represent a $40 million market for the
brings its agricultural inspection and
customs regime into compliance with World Trade Organization (WTO)
cut-flower exports in 1996 were just $47
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
. A large bunch of these flowers sells for
$1.75 wholesale in the
but a bunch of just ten stems goes for $5
. The profit margin easily off-sets export
cut-flower exporters are allowed fair and
transparent access to the Japanese market.
consumed a total of $5.4 billion in cut
flowers. Total world cut-flower imports to
were $170 million or only 3.1 percent of
the entire Japanese cut-flower market.
WTO SPS Agreement, countries are allowed to set their own SPS measures
based on sound scientific standards.
’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,
’s discriminatory customs procedures
result in unjustified delays in shipments—delays that are disastrous for
limited shelf-life agricultural products.
’s practices prevent
exporters from providing the high quality
flowers the Japanese market demands.
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.
1998, the WTO dispute panel ruled against
. The panel concluded that
was violating several principles of the
SPS Agreement, including the transparency principle. It also found that
’s SPS measures were not based on
sufficient scientific evidence. The panel recommended that "
bring its measures into conformity with
its obligations under the SPS Agreement."
sets a precedent that should aid
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
will lower its barriers to cut-flower
imports in a timely manner—if at all. The
government needs to engage
in bilateral negotiations to address
barriers to cut-flower trade and to develop options for resolving the
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
than are European producers. American
growers pay cheaper wages and freight costs to
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.
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