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Breaking down barriers

China's new membership in the World Trade Organization should give Florida business a boost as tariffs drop and trade controls loosen.

By KRIS HUNDLEY, Times Staff Writer
© St. Petersburg Times
published March 3, 2002


Miss Florida Citrus wants Beijing shoppers to buy more grapefruit. Phosphate miners in Polk County want Chinese farmers to use more fertilizer. And Wesley Hiller of Tampa wants to ship recycled plastic to the South China port of Gaolan.

Each of their causes will get a boost through a recent breakthrough in global trade.

After 15 years of fierce negotiations over tariffs, piracy and guarantees of human rights, China was admitted in December to the World Trade Organization. Among the benefits: Tariffs on Florida grapefruit shipped to China will drop 70 percent. Quotas on Chinese imports of phosphate fertilizer from Hillsborough and Polk counties will be raised. And tariffs on telecom equipment and computers shipped by Florida companies to China, valued at nearly $200-million in 2000, will drop to zero.

Another big bonus: U.S. companies will be allowed to sell directly to the Chinese public rather than only through government-controlled trading groups.

As dramatic as the changes are, experienced China hands warn that entering the Chinese market still will be a slow process.

"This agreement cuts lots of barriers out," said Jim Shipley, whose Orlando company, Trading Wise Inc., has been putting together business deals in China for 22 years. "But the biggest problem will still be the American attitude of going to China with a contract in one pocket and a return plane ticket in the other. We think in terms of months and quarters while the Chinese have been at this for 6,000 years. They're in no hurry."

For Florida, which shipped $528.6-million worth of goods to China in 2000, the initial benefits of China's WTO status will be the expansion of existing trade.

The Port of Tampa already ships more cargo to China -- 3-million tons in 2001 -- than to any other country. Most of those shipments are the popular fertilizer, diammonium phosphate, or DAP, made from phosphate mined east of Tampa.

In the mid-1990s, China was importing about 6-million tons of DAP, most coming through Tampa. But in the late 1990s, the Chinese government suddenly imposed restrictions on some U.S. fertilizer products and ramped up its domestic production of DAP. DAP exports from Florida were nearly cut in half.

Under the WTO, China has set an import quota of 5.4-million tons of DAP this year at a 4 percent tariff, the same tax rate imposed on domestically produced fertilizer. Although the full quota will be imported only if the Chinese market demands it, U.S. phosphate officials are optimistic. By 2008, they expect DAP exports to China, a country with 1.3-billion people to feed, to reach nearly 7-million tons.

Kathy Mathers, vice president of public affairs for the Fertilizer Institute in Washington, a trade group, said China's entry into the WTO puts U.S. phosphate products on a level playing field with Chinese products.

"It gives the industry assurance that one of the world's largest fertilizer markets can be supplied by demand for the product rather than internal country politics," she said. "And since Florida is the largest phosphate exporting state, it's likely to feel the impact in the most visible ways."

John Thorington, director of government relations for the Tampa port, welcomes the potential for more phosphate shipments to China through his facility. "The fertilizer trade is the backbone of the port and the WTO solidifies that," he said. "But we think the agreement also opens up new opportunities with China like citrus, which would be a natural."

Some Florida citrus already makes its way to mainland China, thanks to a special agreement in 1999. While California supplies nearly all the existing Chinese market for oranges and tangerines, Florida is promoting grapefruit, a relative novelty in China. Most of that fruit is shipped through ports on the east coast of Florida.

Last year China imported about 75,000 cartons, or 3.2-million pounds, of Florida grapefruit. Mike Yetter, international marketing manager for the state department of citrus, thinks that number could grow to 4-million pounds this year and then take off exponentially. Yetter bases his optimism on the popularity of Florida grapefruit in Japan, whose residents consume nearly as much grapefruit as the entire U.S. population.

"Japan is a much more affluent country, but it only has about 130-million people," Yetter said. "When you consider that China has 10 times the population of Japan, you can see why we're excited about the potential of the China market."

Another reason for excitement: Under the WTO, China will reduce the tariff on grapefruit from 40 percent to 12 percent, making the product more affordable. Today a Florida grapefruit about the size of a navel orange sells in Shanghai supermarkets for as much as $1.

To promote Florida grapefruit over less expensive Chinese citrus, the state sent Dr. Mohamed Ismail, senior researcher with the department of citrus, and Miss Florida Citrus 2001, Jennifer Peavey, on a whirlwind tour of four Chinese cities in December.

Ismail said the lectures and in-store promotions were well-received, though some Chinese wanted to know why they couldn't just grow their own.

"I told them they could, but they wouldn't get the same quality they get from Florida-grown," he said.

Peavey's impression: "They just don't know what grapefruit is."

As Florida promotes commodities such as citrus to the Chinese market, private businesses that have been dealing with China for years expect the WTO to be a plus.

Combustion Tec in Orlando has spent the past 20 years building a market for its equipment used in glass-melting furnaces in China. Today about 25 percent of the company's sales are to Asia, mostly to Chinese plants that make TV glass, window and auto glass and fiberglass.

David Fontes, the company's sales manager for Asia, said the WTO should make it easier for Chinese factories to buy his equipment. "They won't have to manipulate the system as much as they do now," he said.

BPB Celotex of Tampa has been selling acoustical ceiling tiles in China since the late 1980s. While its business has declined in the last few years -- from the Asian economic crisis in 1997 and most recently from a U.S. competitor opening a factory in Shanghai -- Steve Valentin, Celotex's sales rep in the area, said current sales in China still exceed $500,000.

"We've been profitable and we've been able to grow our brand recognition," he said. "We're still in the game."

Valentin said the WTO may encourage more Chinese-owned companies to open plants making low-cost ceiling tiles.

"In the near term, that might not hurt us because the Chinese tend to prefer the famous American product," he said. "But in the long term, who knows?"

George Mitchell, whose Tampa company has been shipping roofing shingles and road materials to China for about a decade, said he's heard little discussion of the WTO. But if it allows him to get paid more quickly or actually store materials in China and distribute them directly, he's all in favor.

"If it streamlines the whole process, it could be beneficial," said Mitchell, whose Construction Materials International represents several U.S. manufacturers. "Our business in Asia was up 70 percent last year and it looks like it's going to continue."

For the past year, Wesley Hiller of Tampa has been trying to resolve a simple import-export dilemma. U.S. furniture stores, such as Rooms To Go, import tons of furniture from China in huge 40-foot-long containers. Frequently, those containers return to China empty.

Hiller, who has been doing business in China for several years, learned that Chinese factories are desperate for the recycled plastic, which often ends up in landfills in the United States. So he negotiated the exclusive right to bring plastics into Gaolan and began shipping containers full of industrial waste plastics out of Charleston, S.C. The only problem: Demand has outstripped supply.

"I'm shipping five or six containers a month and they want 500," Hiller said of the containers that each hold about 22 tons. "We could be a recycler's gateway into China."

Hiller's company, which sells aviation fuels and specialized carbon products, has worldwide operations, so its founder is well aware of the challenges of doing business internationally. But he warns that doing business in China takes special patience.

"The Chinese like to walk around the pool," he said. "Americans want to jump right in."

-- Kris Hundley can be reached at hundley@sptimes.com or (727) 892-2996.

Comings and goings

Value of Florida exports to China:

2000: $528.6-million

1999: $502.5-million

1998: $494.7-million

1997: $640.1-million

-- Source: U.S. Department of Commerce

U.S. diammonium phosphate exports to China, the majority of which are shipped through the Port of Tampa:

2000-2001: 3.6-million tons

1999-2000: 4.5-million tons

1998-1999: 5.9-million tons

1997-1998: 5.3-million tons

-- Source: U.S. Department of Commerce

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