Original Story from Capital Press

Oregon hazelnut growers hope their shared affinity for agriculture with a top Chinese diplomat will create some goodwill in high-stakes trade negotiations.

Luo Linquan, China’s consul general in San Francisco, met June 8 with about 15 farmers in Silverton, Ore., to learn about the hazelnut industry and how it’s affected by turbulent trade relations between the U.S. and China.

“The farmers who were there really made a connection with the consul general because he grew up on a farm,” said Larry George, president of hazelnut processor George Packing. “He realized he had a lot of connection with them and told his story of growing up on a farm.”

Linquan heads one of five Consulate General offices in the U.S. His diplomatic jurisdiction includes Oregon, Washington, Northern California, Nevada and Alaska.

At a time of trade tensions between the two countries, the meeting will hopefully prove to be a “huge coup” in putting a human face to the local hazelnut industry, George said.

“It’s really important to have someone who has visited with growers directly,” said George. “He is a very high-ranking official who is involved in these discussions with Beijing.”

Even before the recent strain in trade relations between the U.S. and China, Oregon hazelnut farmers weren’t in a competitive position to export directly to that country. China imposed a 25 percent tariff on in-shell hazelnuts from the U.S. as well as a 14.5 percent value-added tax.

To compare, in-shell U.S. pistachios are subject to a 5 percent tariff and in-shell hazelnuts from Chile face no tariff.

As a result, the domestic hazelnut industry has long shipped the crop to Hong Kong and other neighboring countries, such as Vietnam, where it’s trans-shipped to China.

In April, China raised the tariff on in-shell U.S. hazelnuts by 15 percentage points in addition to raising duties on other agricultural goods from the U.S.

The change prompted more U.S. exporters to attempt trans-shipments into China rather than selling directly into that market, bringing increased scrutiny from Chinese officials who want to prevent products from side-stepping its tax structure.

The effect is a smaller export pipeline for Oregon hazelnuts, roughly half of which are exported, George said.

“Long term, this conversation had to happen, but short term, it could have a very negative impact on the 2018 crop,” he said.

Before the recent tariff hike, the hazelnut industry had no direct contact with the Chinese government, said Terry Ross, executive director of the Hazelnut Industry Bargaining Association.

Since the increase, hazelnut industry representatives have attended a meeting at the Consulate General’s office in San Francisco and Ross has been invited to speak at the China International Tree Nut Conference in August.

“The Chinese government is engaged, the U.S. government is engaged and we hope something will come to fruition prior to harvest,” said Ross. “It’s been a blessing in disguise at this point.”

Removing the steep tariffs on Oregon hazelnuts would allow them to be shipped directly to China, but any change must occur fairly soon to avoid depressing the market for 2018’s crop.

Hazelnut consumption peaks during the Chinese New Year in early 2019, but the crop must be shipped by October or November of this year to make the market, said George, who has recently traveled to Washington, D.C., twice to meet with the Trump administration about the issue.

“Those markets are time-sensitive,” he said. “The problem is trade issues move slowly but the crop doesn’t change its speed.”