International Markets and Trade.

Suspended in Seattle

Planning and preparations for the World Trade Organization's (WTO) ministerial talks in Seattle had been underway for years, since the Marrakesh Agreement formally ended the Uruguay Round in 1994. No one could foresee the turn of events that would showcase Seattle

as a hotbed of anti-trade activists and media-savvy protesters. The suspension of the ministerial without agreement on a declaration launching a new round of trade negotiations is definitely a blow to US agricultural trade interests and the confectionery industry. On the other hand, our industry has successfully pursued reductions in confectionery tariffs through bilateral or country-by-country negotiations and these sorts of activities will continue if there is no momentum for WTO talks to resume.

When speaking of fair trade for America's food producers and processors, Secretary of State Madeline Albright said, "Our tariffs are low, theirs are too high. From our perspective the goal is to eliminate export subsidies and level the playing field." Along with export subsidies, other "food fight" - inducing issues included multifunctionality and genetically enhanced products.

The suspension of the ministerial talks and the current lack of direction and purpose also have changed the WTO dynamic in other ways. Specifically, the future leader of the WTO, Supachai Panitchpaki of Thailand, has stated that the collapse of the talks in Seattle and inability to set an agenda for global trade negotiations proves that developing countries are now a force to be reckoned with within the WTO. Panitchpaki, presently the Commerce Minister in Thailand, assumes the WTO director-general position in 2002.

International Confectionery Consumption

International average per capita consumption of sugar and chocolate confectionery increased in the last data period (1998).

Individual countries noted some decreases in consumption but the overall picture improved, according to data from The International Office of Cocoa, Chocolate, and Sugar Confectionery (IOCCC)and the Association of the Chocolate, Biscuit and Confectionery Industries of the European Union (CAOBISCO).

Average per capita consumption for the top five countries in each category are:

Still Recovering

US confectionery exports are still recovering from the lingering effects of the Asian financial crisis. Current data available at this time (through October 1999) shows total US confectionery exports down only 2% compared to the same period in 1998. Keep in mind, however, that exports in 1998 decreased 9% from the record year of 1997. Reported 1999 exports sales are presently running 12% behind levels set in 1997.

Eight of the top twenty overseas markets for US confectionery show decreased exports in 1999, four of those showing drops of over 25%.

With current concerns over genetically enhanced products in our overseas markets (exports to the United Kingdom are down 41% in sugar confectionery, 61% in chocolates) there is no clear way to project the stability of the present export marketplace.

Top Ten Export Markets Show Slight Improvement

The overall performance to date of the 1999 top ten markets holds promise that confectionery exports are headed toward a recovery.

Even though half of the top ten show decreases in exports for 1999, the overall top ten total is up approximately 3%. The Philippines market (#3) rebounded more than 65% this year, putting it within $800,000 of its 1997 $25 million high mark. Korea (#6) is up over 70% from last year, but still has a way to go to reach its glory years. Surprisingly, Hong Kong (#7), which weathered the Asian currency crisis without taking a major hit, dropped 27% in 1999. Other Asian countries in the top ten still show the signs of struggling to recover. Whether this can be accomplished within 2000 or 2001 remains to be seen.

Canada and Mexico continue as the top destinations for US confectionery products. In 1999, these two markets accounted for 57% ($272 million of the $470 million total, according to USDA/FAS data) of the US confectionery exports.

Overall Import/ Export Picture

Secretary Albright's comment on tariffs -- "Our tariffs are low, theirs are too high." -- is as true for confectionery as any other products. Tariffs for US confectionery products abroad range from 0-50% and often have value-added taxes, ad valorem duties, or agricultural component taxes added on. Conversely, US tariffs on imported confectionery products are 0-6.2%.

Still after much prodding, numerous countries have reduced their tariffs on confectionery, including many Asian countries.

CHOCOLATE

INTERNATIONAL AVERAGE   14.01 LBS

1. SWITZERLAND          22.40 LBS
2. GERMANY              21.63 LBS
3. BELGIUM              21.34 LBS
4. DENMARK              19.71 LBS
5. UNITED KINGDOM       19.07 LBS
8. UNITED STATES        12.20 LBS

SUGAR CONFECTIONERY

INTERNATIONAL AVERAGE   09.21 LBS

1. DENMARK              17.13 LBS
2. NETHERLANDS          14.11 LBS
3. FINLAND              13.05 LBS
4. IRELAND              12.92 LBS
5. UNITED STATES        12.20 LBS
6. SWEDEN               12.19 LBS
Top 5 US Importing Countries and Export Destinations

                             US IMPORTS

            1994      1995      1996        1997       1998

CANADA    248,301   311,992   359,700     444,394     496,206
U.K.       48,399   106,959   117,772     133,599     143,098
MEXICO     65,519    79,327    93,309     113,083     133,586
GERMANY    71,717    71,310    68,425      62,388      64,360
ITALY      27,760    35,100    39,554      39,187      48,359
WORLD     697,909   876,733   963,036   1,101,645   1,232,355

                             US EXPORTS

                1994      1995      1996      1997      1998

CANADA        184,515   207,782   234,666   268,278   263,712
MEXICO         81,614    44,640    53,464    47,946    60,099
JAPAN          46,772    43,254    44,804    38,345    30,405
AUSTRALIA       8,803    11,302    13,577    19,050    20,624
PHILIPPINES    24,232    17,729    18,759    31,968    18,398
WORLD         557,279   520,800   569,047   649,273   577,359

James H. Johnson, DIRECTOR OF INTERNATIONAL MARKETING SERVICES