French fries and free trade agreements

Booming U.S. potato exports are an example of how free trade agreements can open markets for U.S. products - and fuel cultural trends abroad.

Image credit: Getty
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South Korean consumers have fallen hard for potatoes.

In 2013, a group of teenagers in South Korea made international news when they were booted from a McDonald’s after buying $250 in French fries. The teens had hoped to host a “potato party” – a fad then sweeping South Korea and Japan.

Now the latest Korean food craze is “honey butter” potato chips. Introduced in August 2014 by the Haetae Confectionery & Food Co., the salty-sweet snacks are a national obsession, endorsed by celebrities and K-Pop stars, and sometimes in such scant supply that chip scalpers have created their own market. Vice recently reported that two bags of the coveted chips sold on eBay for $103.50.

Among the chief beneficiaries of the current Korean passion for potatoes are U.S. potato growers and processors, who’ve seen their exports explode in recent years. According to the U.S. Potato Board, U.S. potato exports hit a record high of $1.76 billion in 2014, shipping out 1,643,618 metric tons of potatoes. South Korea is now among the top global destinations for U.S. potatoes, after Japan, Canada and Mexico. The Potato Board reported that exports to Korea grew by 87,000 metric tons – or 13 percent – from 2013 to 2014 alone.

Many variables account for why some food trends take off and others don’t. But U.S. exporters credit one factor in particular for boosting the wide availability of potatoes in the Korean market: free trade.

In particular, growers say, exports have ramped up dramatically since the approval of the U.S.-Korea Free Trade Agreement by Congress in 2011. Among other things, the agreement ended an 18 percent tariff imposed by Korea on U.S. exports of frozen potatoes, thereby lowering prices for Korean consumers and breaking the market wide open for American potatoes.

It’s an instructive example as the United States considers entering the Trans-Pacific Partnership (TPP), a massive trade deal now under negotiation involving 11 other countries in the Asia-Pacific and as much as 40 percent of the world’s economy. Assuming its completion and Congressional approval, TPP has the potential to multiply the successes of the U.S.-Korea agreement many times over.

The potato boom has been especially good for Washington State, whose “potato economy” is worth $4.6 billion a year, according to Matt Harris of the National Potato Council. Washington State (not Idaho) accounts for 70 percent of U.S. potato exports, says Harris, and the potato trade supports 23,500 related jobs. Since the passage of the U.S.-Korea free trade deal, Harris says, Washington State’s potato exports have grown by 72 percent, and in 2014, South Korea bought $62 million of Washington State spuds.

As Korea once did with frozen potatoes, many of the countries involved in the TPP now impose heavy import duties on American goods, limiting U.S. export potential. Vietnam, for example, imposes a 27 percent tariff on auto parts, while U.S. poultry faces a 40 percent duty in Malaysia.

Image credit: Vice

Korean honey butter chips. Image credit: Vice

Boosting U.S. exports by eliminating or reducing tariffs such as these are among the principal goals of U.S. negotiators in the TPP, along with other priorities to help U.S. companies doing business overseas, such as the protection of intellectual property rights, labor and environmental practices, and “phytosanitary” standards relating to issues such as food safety. And for the most part, having a trade agreement with a trading partner has benefitted the United States. In 13 of 17 countries with which America has entered a trade agreement, the balance of trade in goods has improved for the better.

Among the companies that could benefit most from better market access are small and medium-sized firms, and again the case of the booming Asian potato market is instructive. Jason Davenport, president and co-owner of Allied Potato, Inc., says he doubled his workforce to 40 in the past few years, thanks largely to year-on-year double-digit growth in exports to Asia. Davenport’s firm grows, packages and ships potatoes from California and Washington State. In particular, the company specializes in “chipping” potatoes – special varieties of spherical spuds that can fry up into the perfect honey butter chip.

Lower tariffs, says Davenport, helps level the playing field with his global competitors. “And then you can let your product do the talking for you,” he said. Among the countries that Davenport says he hopes will lower its tariffs as a part of TPP is Vietnam.

The success of TPP could mean the birth of new global consumer trends as a burgeoning global middle class gains better access to American goods. The result would be a win not just for the world’s consumers but for American exporters – and a steady supply of honey butter chips.

Anne Kim is editor of Republic 3.0.

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