`Trade Commission Releases Report on U.S. Olive Oil Competitiveness

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Trade Commission Releases Report on Year-Long Investigation into U.S. Olive Oil Competitiveness

Sep. 12, 2013
Curtis Cord

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U.S. House Ways and Means Com­mit­tee Chair­man Dave Camp

The U.S. House Ways and Means Com­mit­tee released a report today on the com­pet­i­tive­ness of the U.S. olive oil indus­try exactly one year after request­ing an inves­ti­ga­tion by the United States Inter­na­tional Trade Com­mis­sion (USITC).

Unen­forced stan­dards lead to mis­la­beled prod­ucts, weak­en­ing the com­pet­i­tive­ness of qual­ity pro­duc­ers- USITC Report

Olive oil pro­duc­ers, importers and mar­keters around the world are sift­ing through the 282-page doc­u­ment to try to gauge how the find­ings might affect their inter­ests.

House Ways and Means Com­mit­tee Chair­man Rep. Dave Camp (R‑Michigan) asked the USITC for an overview of U.S. and global olive oil pro­duc­tion activ­ity, infor­ma­tion on tar­riff treat­ments, grad­ing prac­tices, and an assess­ment of the com­pet­i­tive strengths and weak­nesses of the United States ver­sus major pro­duc­ing coun­tries. A sig­nif­i­cant prob­lem is the lack of infor­ma­tion about the com­mer­cial olive oil indus­try of cer­tain major sup­plier coun­tries to the US. mar­ket,” Camp said.

The USITC launched its inves­ti­ga­tion with a hear­ing in Wash­ing­ton last Decem­ber where Amer­i­can pro­duc­ers, importers and lipid chemists tes­ti­fied on mat­ters rang­ing from Euro­pean sub­si­dies and tar­iffs to olive oil qual­ity and fraud.

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Sub­stan­tial Euro­pean gov­ern­ment sub­si­dies, inef­fec­tual qual­ity stan­dards, com­bined with ram­pant fraud and mis­la­bel­ing have pre­vented the U.S. olive oil indus­try from real­iz­ing its poten­tial,” said Cal­i­for­nia Olive Ranch vice pres­i­dent Adam Engle­hart. North Amer­i­can Olive Oil Asso­ci­a­tion (NAOOA) Exec­u­tive Vice Pres­i­dent Eryn Balch, tes­ti­fy­ing on behalf of major importers, called for enforce­ment of exist­ing inter­na­tional stan­dards for olive oil grades.

Since that hear­ing, USITC inves­ti­ga­tors have met with more than 200 grow­ers, millers, bot­tlers, traders, gov­ern­ment offi­cials, and other indus­try experts through­out all of the coun­tries high­lighted in the report. They deliv­ered their find­ings to the Ways and Means Com­mit­tee on August 12, and today the report was released to the pub­lic.

Although the Com­mis­sion makes no rec­om­men­da­tions on pol­icy or other mat­ters in its gen­eral factfind­ing reports, such §332 inves­ti­ga­tions are often fol­lowed by U.S. trade actions that can have an impact, includ­ing lim­it­ing imports.

A §332 inves­ti­ga­tion can lead to U.S. objec­tions to believed for­eign trade bar­ri­ers or unfair trade prac­tices (such as sub­si­dies), fol­lowed some­times with for­mal com­plaints filed at the World Trade Orga­ni­za­tion, or USTR §301 actions against the objected to for­eign prac­tices,” wrote inter­na­tional trade lawyer Peter Koenig for Olive Oil Times. Sec­tion 332 inves­ti­ga­tions are not idly requested. They are requested for a pur­pose.”

trade-commission-releases-report-on-yearlong-investigation-into-us-olive-oil-competitiveness-olive-oil-times-usitcWhat the USITC inves­ti­ga­tors found:

- Although U.S. pro­duc­tion of olive oil remains small on a global scale, the United States is among the non­tra­di­tional pro­duc­ing coun­tries that are respond­ing to higher global demand, and out­put has risen quickly in recent years. But recent invest­ment in U.S. olive oil pro­duc­tion has slowed in reac­tion to lower global prices fol­low­ing a suc­ces­sion of bumper crops in Spain, and because of con­cern among U.S. pro­duc­ers that their com­pet­i­tive posi­tion in the domes­tic mar­ket is threat­ened by a lack of reg­u­la­tory over­sight.

- Cur­rent inter­na­tional stan­dards for extra vir­gin olive oil allow a wide range of oil qual­i­ties to be mar­keted as extra vir­gin. In addi­tion, the stan­dards are widely unen­forced. Broad and unforced stan­dards lead to adul­ter­ated and mis­la­beled prod­ucts, weak­en­ing the com­pet­i­tive­ness of high-qual­ity pro­duc­ers, such as those in the United States, who try to dif­fer­en­ti­ate their prod­uct based on qual­ity. EU gov­ern­ment sup­port pro­grams con­tribute to high over­all sup­plies of olive oil, reduc­ing global olive oil prices. Many small grow­ers in the EU rely on costly tra­di­tional meth­ods of pro­duc­tion and have costs that are at or above global prices. Because some of these pro­duc­ers would likely cease pro­duc­tion in the absence of income sup­port from the EU, the CAP has the indi­rect effect of increas­ing total global olive oil sup­ply and reduc­ing prices.

- Olive oil mar­keters aim to dif­fer­en­ti­ate their prod­ucts by brand and level of qual­ity, but price remains one of the most impor­tant fac­tors in U.S. con­sumer pur­chas­ing deci­sions. This is due, in part, to a lack of con­sumer aware­ness of qual­ity dif­fer­ences. U.S. con­sumers are gen­er­ally unfa­mil­iar with the range of olive oil grades and uses.

- Broadly, two types of busi­ness mod­els are employed to attract cus­tomers in the U.S. retail mar­ket: cost lead­er­ship or prod­uct dif­fer­en­ti­a­tion. Firms that focus on cost lead­er­ship, such as large bot­tlers that blend oil pro­duced in mul­ti­ple coun­tries, attract con­sumers mostly on price. On the other hand, smaller, ver­ti­cally inte­grated firms pro­duce a higher qual­ity, more fla­vor­ful oil and try to dif­fer­en­ti­ate their prod­uct based on qual­ity.

- The U.S. olive oil indus­try pro­duces high-qual­ity extra vir­gin olive oil, mostly through highly mech­a­nized and inten­sively man­aged groves. U.S. farm level pro­duc­tion costs for olive oil are com­pet­i­tive, but lack of scale and high cap­i­tal costs result in higher prices in the retail mar­ket.

See the full USITC Report

We applaud the USITC for pro­duc­ing this insight­ful work and com­mend Chair­man Dave Camp for request­ing it,” said Kim­berly Hould­ing, exec­u­tive direc­tor of the Amer­i­can Olive Oil Pro­duc­ers Asso­ci­a­tion. We believe con­sumers deserve to under­stand the qual­ity of the oil they are buy­ing and trust its authen­tic­ity and pro­duc­ers deserve fair access to con­sumers in mar­kets both here and abroad.”

Given the USITC doc­u­men­ta­tion of the Euro­pean sub­si­dies, high tar­iffs and sig­nif­i­cant adul­ter­ation and mis­la­bel­ing, we are anx­ious to work with U.S. offi­cials to resolve these bar­ri­ers that clearly impede growth of the U.S. olive oil indus­try,” said Hould­ing.

Jason Shaw, pres­i­dent of Geor­gia Olive Farms said, All we ask is that our oils be allowed to com­pete fairly on qual­ity, taste and value on store shelves for con­sumers in both the U.S. and other coun­tries.”

This is a break­ing news arti­cle. Please check back for updates, analy­ses and reac­tions to the USITC report from around the world.

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