Japan interested in Trans-Pacific Partnership

News
Mar 25, 2013

— Move could benefit beef, but agricultural difficulties remain

Japan has made another of its long-rumored trade decisions official. After almost two years of unofficial talks, Japan has formally asked to join the premier trading club of the Pacific.

Friday, March 15, Japanese Prime Minister Shinzo Abe formally expressed Japan’s interest in joining the Trans-Pacific Partnership (TPP). While some have welcomed the potential of freer access to the important Japanese market, others are not so pleased.

This move has been a long time in coming, with Prime Minster Shinzo’s predecessor—Yoshihiko Noda—having begun informal talks with the U.S. in 2011. The potential of Japan’s entry into the group could open up massive trade opportunities via reduced trade barriers on key agricultural commodities, beef in particular.

In 2012, Japan was the U.S.’ third largest market for beef and variety meat by volume (152,763 metric tons) and the second largest market by value ($1.03 billion). Currently, Japan maintains a 38.5 percent tariff on beef imports. According to Tetsuro Shimizu, general manager at the Norinchukin Research Institute in Tokyo and reported in Bloomberg, eliminating the beef tariff could result in as much as a 40 percent increase in Japan’s beef imports.

While a boon to beef exporters, this could displace over half of Japanese domestic production. Despite this, Prime Minister Shinzo is said to be willing to sacrifice protections on Japanese beef.

Agricultural science professor Shinichi Shogenji of Nagoya University asserted that the quality of Japanese Waygu beef is sufficient to compete successfully with imported beef, this being a widelyshared opinion in Japan.

Japan is one of the largest economies in Asia and imports roughly 60 percent of their food items. It was also the fourth-largest U.S. export market in 2012, to the tune of almost $14 billion. The country is also Asia’s biggest importer of beef. For 2012, Japan imported¬† 515,108 tons of beef according to the Japanese agricultural minister. Australia had the largest chunk of that import market at 62 percent. The U.S. and New Zealand were second and third respectively.

Acting U.S. Trade Representative Demetrios Marantis welcomed the announcement, but was not without hedges.

“While we continue to make progress in these consultations, important work remains to be done. We look forward to continuing these consultations with Japan as the 11 TPP countries consider Japan’s candidacy for this vital initiative in the Asia-Pacific region. We will continue to consult with Congress and stakeholders as we proceed.”

The “important work” seems to revolve around a number of economic sectors that the respective governments want to protect.

Japan currently has high tariffs on select commodities such as rice, sugar, and dairy products in an attempt to protect their domestic production. According to Bloomberg, Japan imposes tariffs of 778 percent on imported rice, 328 percent on sugar and 218 percent on powdered milk.

“Rice is the national staple, sugar is vital to Okinawa prefecture and milk is what our kids drink,” said Professor Shinichi.

Despite difficulties with potential protectionist efforts on the part of Japan to shield its dairy industry, the announcement of Japan’s formal interest in TPP was welcomed by the U.S. dairy industry, according to DTN’s Washington Insider.

“The addition of Japan, the No. 3 economy in the world and a major dairy importer, would dramatically increase the commercial significance of the talks,” said Tom Suber, president of the U.S. Dairy Export Council. “Japan’s involvement will add additional potential for greater U.S. dairy exports, which will supplement the opportunities in existing TPP participants’ markets such as Vietnam and Malaysia.”

However, a joint statement released by both the U.S. and Japan following Prime Minister Shinzo’s announcement, it was said that “all goods would be subject to negotiation” in the TPP process. The statement did include language that leaves the potential for Japan to protect some of its key sectors:

“Recognizing that both countries have bilateral trade sensitivities, such as certain agricultural products for Japan and certain manufactured products for the United States, the two governments confirm that, as the final outcome will be determined during the negotiations, it is not required to make a prior commitment to unilaterally eliminate all tariffs upon joining the TPP negotiations.”

Background

TPP began in its current form in late 2011 as a coalition of nine Pacific countries.

It grew up out of the earlier group, the Trans-Pacific Strategic Economic Partnership Agreement, which dates back to 2005. The goal of TPP is to improve free trade agreements and enhance trade relations and market access to member countries. To date, there are 11 member countries; Australia, Brunei, Chile, Canada, Malaysia, Mexico, New Zealand, Peru, Singapore, the U.S., and Vietnam.

Japan would be the 12th country to join and its entry is likely to be a primary topic at the upcoming 17th round of TPP negotiations which will be held in Peru in late May. — Kerry Halladay, WLJ Editor

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