July 9, 2018
Japan became the second country to ratify the Comprehensive & Progressive Trans-Pacific Partnership (CPTPP) on July 6, which could be implemented in early 2019 after six of the 11 countries that signed the agreement have ratified it. This development comes on the same day the U.S. and China escalated a trade war that has already imposed harm on U.S. growers, potentially compounding the difficult economic conditions further.
A joint statement from the U.S. Wheat Associates (USW) and the National Association of Wheat Growers (NAWG) explained that implementation of the CPTPP without the U.S. is a “time bomb set to demolish more than 60 years of hard work by multiple generations of U.S. farm families to develop a large and loyal market for U.S. wheat in Japan.”
Canada and Australia, which are major competitors to the U.S. in Japan's wheat market, are also parties to the CPTPP agreement, meaning that implementation would put U.S. wheat farmers at a severe disadvantage in what is currently their second-biggest wheat export market.
Once implemented, the agreement calls for incrementally discounting the effective import tariffs that Japanese flour millers pay for imported Australian and Canadian milling wheat from about $150 to about $85 per metric ton, while effective tariffs on imported U.S. wheat would remain at about $150/mt.
Sources within the Japanese milling industry estimate that this price discrepancy would force them to start looking at alternatives to U.S. wheat and cut average total imports of western white, dark northern spring and hard red winter wheat by more than half — from about 3.1 million to 1.35 million mt per year or less. If nothing changes before the effective tariff schedule is fully implemented, U.S. wheat farmers and the U.S. grain trade will essentially be writing a $500 million check to Australian and Canadian farmers every year.
“The U.S. government has the power, however, to defuse this device and avoid an unnecessary and costly disaster,” USW and NAWG said.
USW and NAWG are calling on the Trump Administration to end this threat by taking the bold but necessary steps toward joining the CPTPP or engaging in bilateral negotiations. “We see no other way to stop a situation that we believe will cut already unprofitable cash wheat prices even further,” they said.
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