On Monday, the U.S. and Japan signed two new agreements on trade, including one on agricultural exports.
U.S. negotiators have been working to develop new trade agreements with Japan and other countries in the wake of U.S. withdrawal from the multinational Trans-Pacific Partnership (TPP) process. The Japan bilateral agreement keeps intact essentially all of the trade benefits the U.S. would have gained in Japan under TPP.
Japan is the third-largest agricultural export market and accounted for $14.1 billion in food and agricultural exports in 2018. Japan will eliminate or reduce tariffs on approximately $7.2 billion in U.S. agricultural exports. Once this agreement is implemented, more than 90% of U.S. agricultural imports into Japan will be duty free or receive preferential tariff access, according to a statement from the White House.
The agreement immediately eliminates all tariffs on U.S. exports of sweet corn, almonds, broccoli and prunes, among other things. Tariffs on products such as ethanol, cheese, whey, fresh cherries and other farm and ranch products will be phased out over a number of years. The U.S. will also benefit from increased export quotas on products like corn starch, malt, potato starch, fructose and more.
According to an American Farm Bureau Federation "Market Intel" report, over the last 20 years, agricultural exports to Japan averaged $10.7 billion, dropped below $8 billion only once ($7.9 billion in 2005) and reached $12.9 billion in 2018.
The Farm Bureau analysis details that the U.S. needs tariffs to fall below what second-year members of the Comprehensive & Progressive Agreement for Trans-Pacific Partnership (CPTPP), as it became known after the U.S. withdrew from TPP.
It is known that beef tariffs would fall from 38.5% to 26.6%. Fresh or chilled poultry tariffs would fall from 11.9% to 7.9%. Duck, geese and turkey meat would instantly be tariff free, as would the majority of fresh vegetables. All nuts except chestnuts and pecans would enter Japan duty free instantly. The tariff on fresh apples would fall from 17% to 11.4%. The tariff on cherries would fall from 8.5% to 3.4%. Fresh strawberries, raspberries, peaches and melons would all enter duty free.
It is unknown how quotas will be handled with dairy and pork, but agricultural groups remain optimistic about the market potential increases in those segments as well. Without a strong trade agreement that addresses the inequalities in market access granted to competitors by the Japan-European Union and CPTPP agreements, a 2019 U.S. Dairy Export Council study found that the U.S. risked losing $1.3 billion in exports over a decade, costing dairy farmers $1.7 billion in farm income.
Dr. Dermot Hayes, an economist at Iowa State University, estimates that exports to Japan will grow from $1.6 billion in 2018 to more than $2.2 billion over the next 15 years as a result of the U.S. pork industry getting market access in Japan as favorable as its competitors.
Farm Bureau president Zippy Duvall noted that while those in U.S. agriculture aren’t yet finished opening this market, the conclusion of these talks means the U.S. can now trade with Japan with the same advantages enjoyed by signers of the CPTPP trade agreement. “That’s great news,” he said in a statement. “We hope the momentum from this win carries through to the negotiations with China this week and sets the stage for similar bilateral agreements with other countries involved with the CPTPP.”
The National Association of State Departments of Agriculture (NASDA) joined other leading agricultural stakeholders at the White House to witness the signing of the initial U.S.-Japan Trade Agreement. In attendance were Indiana director of agriculture Bruce Kettler, at-large member of NASDA’s board of directors and chair of NASDA’s Plant Agriculture & Pesticide Regulation Committee, and NASDA chief executive officer Dr. Barbara P. Glenn.
National Cattlemen’s Beef Assn. president Jennifer Houston said she was deeply honored to attend the ceremony at the White House to celebrate the bilateral trade agreement with Japan. "As the top market for U.S. beef exports, Japan accounts for one-quarter of our exports and roughly $2 billion in annual sales. As a beef producer, I understand the value of exports to my bottom line, and President [Donald] Trump understands that increased access to foreign markets like Japan is the economic stimulus we need," Houston said in a statement.
U.S. Grains Council chairman Darren Armstrong, a corn farmer from Hyde County, N.C., also joined President Trump and other U.S. agriculture leaders at the White House Monday for the signing of the agreement.
“This agreement provides certainty and stability in our second-largest corn market, brings sorghum imports to a zero tariff level immediately and reduces the import markup on barley. We anticipate additional market access measures related to ethanol to be addressed in the next round of negotiations with Japan coming soon,” Armstrong said.
The wheat industry praised the deal, which gives the U.S. wheat the same preferential advantage given to other CPTPP nations. “As we hoped, the text confirms that the agreement will put U.S. wheat back on equal footing with wheat from Canada and Australia when it is implemented,” said U.S. Wheat Associates president Vince Peterson, who attended the event at the White House. “In addition, Japan has agreed to open country-specific quotas for U.S. wheat and wheat product imports. The Trump Administration and negotiators for both countries clearly understood what was at stake for U.S. wheat farmers and made sure to have our backs in this agreement.”
U.S. wheat represents about 50% of all of the wheat Japan imports each year and is currently valued at more than $600 million. That volume represents more than 10% of total annual U.S. wheat exports.
The Japanese Parliament is expected to approve the agreement later this fall. It may take effect as early as Jan. 1, 2020. No action is necessary by the U.S. Congress, since the deal isn’t a full trade agreement.
The National Grain & Feed Assn. (NGFA) said in a statement the group welcomed the work done by the Trump Administration, Japan's Prime Minister Abe and their respective trade negotiators who worked intensively to complete this agreement in a remarkably short, one-month period.
“NGFA also commends U.S. and Japanese trade negotiators for their commitment to engage in a second stage of trade negotiations starting in April that will focus on addressing additional agricultural tariffs as well as important sanitary and phytosanitary and non-tariff barriers to trade to enhance further the positive, mutually beneficial and long-standing U.S.-Japan trade relationship to benefit consumers, economic growth and job creation in both countries,” NGFA president and CEO Randy Gordon said.