The U.S. beef industry has grappled w i t h a myriad of trade issues from the moment it first sent its beef out of the country. It took years of talks to be able to start sending beef to Japan. So it’s ironic that Japan has dealt another blow to U.S. exports there by triggering its safeguard mechanism.
Japan says rising imports of frozen beef in the first quarter of its fiscal year (April-June) triggered the safeguard. This resulted in an automatic increase in Japan’s tariff rate from 38.5 percent to 50 percent from Aug. 1 to March 31 next year. This is at a time when all Australian beef entering Japan is subject to only a 27.2 percent tariff because of its trade agreement with Japan.
The U.S. has no such agreement so is subject to the tariff increase, as are Canada, New Zealand, and other countries that don’t have agreements. This makes it even more imperative for the U.S. to have a bilateral trade agreement with Japan, especially as it was the top export market in 2016 for U.S. beef, with the trade valued at $1.5 billion. There’s little hint though of talks between the U.S. and Japan starting any time soon.
Another irony is that the Trump administration pursued and heralded the reopening of China’s market to U.S. beef. Yet China is a fledgling market and the U.S. will not ship meaningful quantities there until and unless the industry radically changes its production practices and stops using growth promotants and feed supplements that contain ractopamine.
Japan, on the other hand, is the U.S.’s largest market, with record tonnages sent in the years leading up to the U.S.’ first BSE case in December 2003. It took more than three years to persuade Japan to accept U.S. beef again and then it would only accept beef from cattle under 21 months of age. So, 2007 exports totaled only 46,744 metric tons (mt). Japan only relaxed its age limit to under 30 months in February 2013. U.S. exports to Japan built after that (except for a drought-induced dip in 2015) to 258,653 mt last year. This put Japan No. 1 in volume terms ahead of Mexico. U.S. frozen beef exports to Japan in 2016 were worth $418 million.
Yet another irony is that Japanese data show that imports were only 113 mt over the trigger amount, as the U.S. Meat Export Federation (USMEF) noted. In addition, imports were only over the quota because imports in the prior year quarter were lower than in previous years. As USMEF noted, Japan maintains separate quarterly import safeguards on chilled and frozen beef, allowing imports to increase by 17 percent compared to the corresponding quarter of the previous year. Japan’s frozen beef imports in the 2016 Japanese fiscal year were lower than in previous years. Thus, the growth in imports during this first quarter of the current fiscal year exceeded 17 percent, driven in part by rebuilding of frozen inventories and strong demand for beef in Japan’s foodservice sector. The most recent quarter saw strong growth in imports from all of Japan’s main beef suppliers, says USMEF.
In other words, the U.S. is paying a heavy price for helping Japan rebuild its depleted inventories and boost its booming gyudon bowl business, which relies on U.S short plates. One can only hope Japan can be persuaded to reduce the increased tariff or revert to the 38.5 percent level. The stumbling block is that the tariff increase was agreed to in 1994’s WTO Uruguay Round, and Japan will be unwilling to make any kind of deviation from that agreement.
However, the industry appears to have won a significant victory to preserve the agricultural provisions of the North American Free Trade Agreement (NAFTA). The Trump administration’s blueprint for a new NAFTA leaves its agricultural provisions intact, thus acknowledging their benefit to the U.S. economy. This is a big victory for the beef industry, which feared that renegotiation of or withdrawing from NAFTA could have cost it billions of dollars annually. That’s because the industries in the U.S., Canada and Mexico are highly integrated, with trade in cattle and beef flowing between all three countries.
The U.S. Trade Representative’s Office released an 18-page summary of specific negotiating objectives for the initiation of NAFTA negotiations. The summary had the clear imprint of new U.S. Trade Representative Robert Lighthizer, say observers. Agriculture Secretary Sonny Perdue also played a significant role in persuading President Donald Trump to leave NAFTA’s agricultural provisions untouched. At a meeting with the president, Perdue produced a map that showed the U.S. counties that would be most impacted by disruptions to NAFTA agricultural trade. The map also showed that every one of these counties had voted for Trump in the presidential election, say observers. — STEVE KAY
