China's Growing Exports: Food and Fear

As its shipments of fresh produce to the U.S. increase, so do concerns about contamination

by Pallavi Gogoi

As the U.S. and China hold high-level economic talks, there's no shortage of important topics. At the top of the list for Treasury Secretary Henry Paulson and China Vice-Premier Wu Yi will be China's trade surplus with the U.S., which hit $232 billion last year and has prompted Congress to consider all sorts of economic sanctions against China. China's currency policy is a related issue. And the safety of pet foods from China has received attention because of the recent deaths of some animals in the U.S.

However, one topic has received less attention: China's growing influence as an exporter of fresh produce for human consumption. While China's overall exports of agricultural goods are relatively small, they're growing at a torrid pace. In the first three months of this year, imports of fresh fruit from China grew 279%, to $7.4 million; fresh vegetables grew 66%, to $32 million; and fruit and vegetable juices grew 98%, to $109 million.

Vulnerable Supply

This huge increase of food imports into the U.S. has been fed by the growth of large retailers like Wal-Mart Stores (WMT) and consolidation of others such as Albertsons and Kroger (KR), all of which are looking for a 52-week supply of fresh fruits and vegetables for their consumers. "People have gotten used to buying strawberries in the winter," says William Hallman, director of the Food Policy Institute at Rutgers, The State University of New Jersey.

As large manufacturers such as Kellogg (K), General Mills (GIS), and Kraft (KFT) buy more from the country, China looks as if it could become the same kind of export juggernaut in fresh foods that it has become in manufactured goods. Consider this: In 2000, China accounted for 1 million pounds, or less than 1%, of all U.S. fresh garlic imports. By 2005, China dominated that market, exporting 112 million pounds, or 73%, of the total garlic import market. The same goes for strawberries: China exported just 1.5 million pounds in 2000 and now exports 33 million pounds to the U.S.

What's not to like about reasonably priced berries in January? Well, some food experts are concerned. The trouble is that perishable commodities shipped over vast distances are some of the most vulnerable to contamination and other issues. Rutgers' Hallman points out that much fresh produce is meant to be eaten raw, and there's no way to kill microorganisms they may contain, the way food companies can use irradiation on poultry or meat. "The longer the distance that the fresh produce travels, the more chances there are for contamination from mishandling and more time for the microbes to multiply," says Hallman.

Lax Standards

China's record with food imports isn't reassuring. Just last month, 107 food imports from China were detained by the Food & Drug Administration at U.S. ports, according to The Washington Post. Among them were dried apples preserved with a cancer-causing chemical and mushrooms laced with illegal pesticides.

With the backdrop of the tainted pet food ingredients, food safety will be one of the issues addressed in the Washington trade talks on May 23. Commerce Secretary Carlos Gutierrez said the topic would be addressed formally before the discussions ended on Wednesday (see BusinessWeek.com, 5/21/07, "How Safe Is The Food Supply?").