Analysis of the harmonized tariff schedule – or HS – codes that the US Department of Agriculture uses to track imports and exports show exports of organic products from the US are up 58% from 2011 to 2014 over what they would have been without the organic equivalency arrangements.
The research, conducted by Edward Jaenicke, an associate professor of agricultural economics at Penn State University, also found annual organic imports into the US from 2013-2014 were double what they would have been without any agreements.
The findings suggest the US should maintain and renew existing organic equivalency arrangements, which allow organic products from one country to be sold as such in another country without additional inspections or paperwork, according to OTA. The findings also support potentially establishing the arrangements with additional countries to further expand and support the sale of organic products.
Currently, the US has arrangements with only a handful of countries, including Canada, the EU, Japan, Taiwan, South Korea and Switzerland. The latter two, however, were not included in the study because they were signed in 2014 and 2015 respectively and therefore had insufficient data.
Since the US entered the arrangements, US organic exports, which are estimated to be $3.2 billion, have increased 44% to the EU, 17% to Japan and 14% to Canada.
Canada and Japan offer most potential for US exports
Despite these figures, the study suggests arrangements with Canada and Japan have the most potential impact on US organic exports.
Using a “gravity” trade model that assumes trade is likely to be larger between countries with larger economies and those which are physically closer to each other, the study estimates the organic equivalency arrangements will generate the largest increase in annual organic exports to Canada, which is estimated to be 455%.
The second most significant increase will be to Japan, estimated to be 220% annually. Exports to Japan also could get a boost with the upcoming Olympics as the country wants to offer organic products in the athlete villages, according to OTA, which adds that the country also is encouraging athletes to ask the host cities where they stay prior to the Olympics to provide organic products as a way to further drive domestic and international demand and production.
The model suggests EU has the least potential impact with a predicted “little change in annual organic exports,” according to the study.
Limited HS codes restrict trade tracking
Jaenicke explains in the report that EU’s grim outlook is due in part to the limited HS codes for organic ingredients. There currently are only 34 export and 40 import codes for organic products – the first of which was issued in 2011. These codes only track single-ingredient items, so they do not capture popular organic products, such as baby food and snacks.
“Just because a product does not have an HS code does not mean there is no organic trade in that product,” the study emphasizes. As a result, the full amount of organic trade likely is substantially higher than the values in the report, it adds.
Laura Batcha, CEO of OTA, explained that there are several reasons an organic product may not yet have an HS code. First, the product may fall under the $1 million threshold; second the number of exporters and importers may be so small that the code is withheld to protect confidentiality; or third because no one has gone through the laborious process of petitioning for an HS code for a particular product.
Despite these limitations, Batcha said the study shows a “net positive benefit” for the equivalency arrangements and OTA and others should work to preserve and expand them in coming years.
She added industry also should work to expand the list of HS codes for organic products so that organic trade can more accurately be tracked and ultimately better trade policies created.