BeGATTing an End to Food Fight Era : Accord Would Help Keep Importers Such as Trader Joe’s Out of Trade Tiff Crossfire

The chicken wars of 1987, the tomato sauce skirmish of 1990 and the flap over soybeans in 1992 escaped notice from much of the world, but not from Robert Berning and Douglas Rauch. Even the most obscure global food fight can disrupt the flow of Champagne from France, gnocchi from Italy and tuna from Thailand for these buyers at Trader Joe’s chain of international grocery and liquor shops.

As talks in Geneva to extend the General Agreement on Tariffs and Trade seesaw toward a Wednesday deadline, Berning and Rauch are counting more than most folks on the proposed renewal of the 116-country import-export accords to bring, among other things, a lasting peace to the grocery front.

As much as 40% of Trader Joe’s $500-million-a-year business involves international products. Besides the obviously imported wines and pastas, Trader Joe’s gets Brazil nuts in India and cashews in Brazil, cheeses from Denmark, soups from Germany, frozen shrimp from Japan, pine nuts from China, peach jam from France, canned cherries from Hungary and preserved plums from Czechoslovakia.

To be sure, currency fluctuations and the dollar’s buying power remain the company’s principal international concern. But temporary trade flare-ups, with their predictable flurry of import duties and barriers, pose formidable obstacles for the grocer as well, not only interrupting the flow of supplies to store shelves, but undermining its established relationships with producers of its thousands of Trader Joe’s house-branded goods.

“If new tariff and trade rules are in place, businesses like ours can plan better,” says Berning, vice president for liquor operations at the 59-store chain based in South Pasadena. “We’ll know that we won’t have to worry about an outbreak of something silly causing us problems.”

For Berning, the chicken wars, in particular, underscore the Byzantine relationships among trading nations and the often bizarre results that come from their tiffs.

As Berning remembers it, the European Community became upset seven years ago that chickens imported from the United States were chock-full of hormones and temporarily halted imports. In retaliation, the United States doubled the import tariffs on European white wine exports, momentarily shutting off Berning’s supply of Champagne and white Bordeaux. Similar, and equally short-lived, tariffs were imposed again last year to protest French government subsidies for its soybean oil industry.

For Rauch, it was a fight over U.S. beef exports to Europe that brought home the impact of the tangled web of trading rules. In 1990, Trader Joe’s had just signed an agreement with a French producer of a particularly sweet and pungent tomato sauce. Shipments were about to begin when the EC suddenly blocked imports of American beef, again because of complaints of cattle hormone injections. Trade officials on this side of the Atlantic responded swiftly by adding tariffs to tomato products, catching Trader Joe’s sauce deal in the squeeze and killing it.

“A new GATT agreement should bring a stop to that sort of retaliatory duty,” Rauch said. “It can bring a stability to our business that we don’t have.”

Potentially more important, however, is the possibility that a renewal of the GATT accord next week in Geneva will open a broad new range of trading partners for Trader Joe’s and other businesses throughout the world.

Stabilizing the rules of international trade to increase the flow of goods around the globe has been the primary purpose of GATT since its post-World War II inception in 1947. In the intervening 46 years, as average tariffs in GATT member countries have fallen from about 40% to 5%, international trade has swelled.

And so have the fortunes of Trader Joe’s. Founded 25 years ago by Joseph Coulombe, it started out selling inexpensive wines and imported cheeses and coffees in a handful of university towns where Coulombe reasoned he would find the most sophisticated palates. As global markets opened, the grocer’s shelves expanded to include nuts, pastas and a wide-ranging assortment of frozen fish, vegetables and prepared snacks and meals.

Most recently, Trader Joe’s has begun to import a variety of goods from former Soviet-bloc countries, including Hungary and Czechoslovakia, and Caribbean countries because they are being given favored trade treatment by the United States to stimulate their economies.

Although imports are likely to be further stimulated by the GATT accord, a potential side effect could be felt here in the United States by businesses whose products now compete with highly subsidized foreign foods, such as pastas and other grain products.

Trader Joe’s currently purchases whole wheat pastas from Italy because comparable U.S. products are as much as three times as costly. However, if the GATT talks lead to a reduction in the subsidies, as U.S. negotiators hope, the gap between the Italian and domestic products will be considerably narrowed.

“Customers may pay more,” Rauch says, “but American manufacturers may find new markets here at home.”