The Japanese Diet, the nation’s Parliament, ratified its trade agreement made with the U.S., drawing praise from U.S. agricultural groups and prompting calls for additional negotiations. The phase 1 deal is expected to go into effect on Jan. 1, 2020.
The initial agreement ensures that the U.S. doesn’t fall behind competitors like Australia and Canada that now are in the Comprehensive & Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Under the newly ratified agreement, Japan will eliminate or reduce tariffs on an additional $7.2 billion of U.S. food and agricultural products. More than 90% of U.S. food and agricultural imports into Japan will either enter duty free or receive preferential tariff access once the agreement is implemented. As an example, tariffs for fresh, chilled and frozen beef will be reduced from 38.5% to 9% in 15 years.
In a statement, U.S. Meat Export Federation (USMEF) president and chief executive officer Dan Halstrom said U.S. beef and pork industries look forward to expanded opportunities in Japan, which is already the largest value destination for U.S. pork and beef exports, with a combined export value of $3.7 billion in 2018. “This agreement is one of the biggest developments in the history of red meat trade, as no international market delivers greater benefits to U.S. farmers and ranchers -- and to the entire U.S. supply chain -- than Japan,” Halstrom said.
Ryan LeGrand, president and CEO of the U.S. Grains Council (USGC), noted in a statement, “The agreement solidifies trade with our second-largest corn market, immediately reduces U.S. corn and sorghum imports for all purposes to a zero tariff level, reduces the U.S. barley markup and includes a staged tariff reduction for U.S. ethanol and U.S. corn, barley and sorghum flour. In addition, U.S. feed and food corn, corn gluten feed and [dried distillers grains with solubles] will continue to receive duty-free market access.”
Japan purchased more than $2 billion of U.S. corn in the most recent marketing year, and it is an important market for food and feed barley as well as sorghum and promises to be an important future market for U.S. ethanol, USGC added.
"In negotiating and approving this agreement, our countries have built on a long-standing relationship of mutual trust and embodied that sentiment for the foreseeable future,” LeGrand said. “We look forward to continued work with our Japanese partners on a more comprehensive trade package that will address important non-tariff barriers and what we hope is continued improvement in the ethanol sector."
The U.S. Dairy Export Council (USDEC) and National Milk Producers Federation (NMPF) also offered praise for the latest action on the Japanese trade front. They urged U.S. trade negotiators to swiftly complete a phase 2 agreement in order to maximize opportunities for U.S. agriculture and address remaining gaps and inequalities in market access granted to U.S. competitors by the Japan-European Union and CPTPP agreements that leave U.S. dairy at a disadvantage.
Butter and milk powders were both exempted in this first round package, which recently raised concerns from previous U.S. chief agricultural negotiator Darci Vetter as it could signal to other trading partners that the U.S. is willing to allow future exclusions of the same products.
Jim Mulhern, president and CEO of NMPF, said the organization agrees with the Administration that market access in Japan under the Trans-Pacific Partnership wasn’t sufficient.
“U.S. negotiators must achieve a better outcome for U.S. dairy farmers in a final agreement to remedy this. Addressing the missing pieces of market access from phase 1 and establishing safeguards for the use of common cheese names should be a priority,” Mulhern said. “Trade negotiators must finish the job and deliver a full, comprehensive agreement that prioritizes the needs of American dairy farmers.”
A 2019 USDEC study found that if the U.S. has at least the same market access as its competitors, the U.S. could roughly double its share of the Japanese market over the next 10 years, underscoring the necessity of a phase 2 agreement. Given the importance of the U.S. market to Japan's exports, NMPF and USDEC have emphasized that the terms of trade Japan offered to U.S. exports should not just meet but exceed those granted to its less valuable customers.
Tom Vilsack, president and CEO of USDEC, stated, “We know that American-made products can fill the growing Japanese demand for high-quality dairy, but a comprehensive phase 2 agreement is necessary to deliver the complete range of market access opening and assurances necessary to ensure that U.S. dairy products can best compete.”
During the same hearing at which Vetter voiced her concerns, Matthew Goodman, senior vice president and senior adviser for Asian economics at the Center for Strategic & International Studies, warned that it likely will be difficult to reach the second stage agreement with Japan in the near term. “I think Japan is reluctant to move into a full-bore free trade agreement,” Goodman said. “They’ve always been reluctant and are much more inclined to have the U.S. to rejoin the CPTPP.”