In recent days, both the U.S. International Trade Commission (ITC) and the Office of the U.S. Trade Representative (USTR) each held their own meetings on the potential impact of a trade pact with Japan. Those in agriculture highlighted how there could be great potential within a deal.
Japan is a lucrative market for many in agriculture, especially as market share is at risk because competitors will be benefitting from the soon-to-be implemented Comprehensive & Progressive Agreement for Trans-Pacific Partnership (CPTPP) as well as the European Union-Japan Economic Partnership Agreement for dairy producers.
The National Milk Producers Federation (NMPF) and the U.S. Dairy Export Council (USDEC) represented one of only four industries that submitted testimony to ITC for the hearing. Japan is a critically important market for U.S. dairy producers, ranking fourth among U.S. export markets, with exports valued at almost $300 million last year.
The testimony from NMPF and USDEC expressed “strong concerns about the text of the Sept. 26 U.S.-Japan Joint Statement, which appears to suggest the acceptance of a ceiling on the level of agricultural ambition before talks have even begun.” President Donald Trump already agreed to not press Japan's Prime Minister Shinzo Abe for increased agricultural market access when they launched the talks in September.
In testimony, the dairy groups stated, “A reciprocal and full opening of the U.S. and Japanese dairy markets -- the appropriate level of ambition for the United States to pursue in its trade negotiations with valuable destination markets for U.S. agricultural products -- would have the potential to increase U.S. dairy exports to Japan by 450% if Japan’s other trading partners continued to be limited by the terms of their current trade agreements scheduled to be implemented in the near future. Such an outcome could boost U.S. dairy farmer income by a total of $12 billion, or 3%, over a 10-year phase-in period.”
However, if an agreement is at the level of the prior trade agreement, then they said the U.S. "could anticipate gaining an additional 7,000 tons of dairy product exports into Japan, with a value of about $25 million annually.” Losses would be even greater -- estimated at an annual loss of $18 million of current U.S. dairy exports to Japan -- if competitors are able to have additional market access under CPTPP, from which the U.S. is left out.
Wheat producers also called for protection of exports absent U.S. inclusion in CPTPP.
Testifying Dec. 10 at a USTR public hearing and in written testimony, U.S. Wheat Associates president Vince Peterson explained the risk to wheat export sales without a quick U.S.-Japan agreement.
The CPTPP will grant preferential access to Canadian and Australian wheat exports, he said, by reducing the effective tariff on their wheat. Eventually, this reduction will be about $70 per metric ton, or 45% below the current effective tariff applied to U.S. wheat. Because Japan has no obligation to change this tariff reduction schedule, Peterson said it will likely shut most U.S. wheat exports out of the Japanese market and undo decades of market development work.
“U.S. Wheat Associates has had an office in Tokyo [Japan] for more than 60 years,” he said. “We have invested countless hours and millions of hard-earned farmer dollars and federal export market development program funds building this market. During that time, the Japanese milling industry has become an indispensable partner for U.S. wheat farmers.”
Peterson added that over the last five marketing years, Japan has been the largest, most reliable and valuable market for U.S. wheat and consistently returns almost $1 billion per year to U.S. wheat farmers and the grain trade.
“All that is at risk without a U.S.-Japan agreement that quickly ends the preference Canada and Australia gain as members with Japan of the CPTPP,” Peterson said. “We thank you for understanding the plight of these farmers, who already face severe trade disruptions in other markets.”
Looking ahead, Peterson noted, “U.S. wheat farmers and Japan’s flour milling industry hope that we can maintain provisional equivalence for U.S. wheat imports while our two countries conduct ongoing, good-faith negotiations, and we urge the Administration to act quickly to save our market in Japan.”