The partial U.S.-Japan trade deal that will level the playing field for beef trade is just one signing away from reality. It’s been a long time coming.
The Upper House of Japan’s Diet (similar to the U.S. Senate) passed the partial U.S.-Japan trade agreement Wednesday morning, Dec. 4. This follows its passage by the Lower House of the Diet on Nov. 19.
In part, the partial agreement will reduce Japanese tariffs on fresh and frozen U.S. beef from the current 38.5 percent to 9 percent over several years. This will reportedly put the U.S. beef industry on equal footing with the member countries of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) countries and the European Union.
“I commend Japan’s quick action to approve these important trade agreements between our two nations, which are the world’s first and third largest economies,” said U.S. Trade Representative (USTR) Robert Lighthizer in his announcement of the passage last Wednesday.
“We expect the president to sign the implementing proclamation for the United States next week.”
The expectation is the agreement will take effect on Jan. 1, 2020.
Details of the deal
The partial agreement was first announced back in September and then signed by Lighthizer and Japanese Ambassador Shinsuke Sugiyama. At the time, the details of the agreement had not been made public, but the Office of the USTR recently released the text of the agreement.
According to the text, certain U.S. agricultural products, including fresh and frozen beef, will see tariffs reduced as follows:
• Year 1 (2020, assuming implementation on Jan. 1, 2020); 26.6 percent;
• Year 2 (2021); 25.8 percent;
• Year 3 (2022); 25 percent;
• Year 4 (2023); 24.1 percent;
• Year 5 (2024); 23.3 percent;
• Year 6 (2025); 22.5 percent;
• Year 7 (2026); 21.6 percent;
• Year 8 (2027); 20.8 percent;
• Year 9 (2028); 20 percent;
• Year 10-14 (2029-2033); duties will decline to 9 percent from 20 percent “in six annual stages beginning on April 1 of Year 10;” and
• Year 15 (2034) and beyond; 9 percent.
Japan has a system of import safeguards. Safeguards effectively try to prevent wild surges of certain imports into the Japanese market through additional tariffs. When safeguards are triggered, increased tariffs are applied. Japan’s safeguards on beef are also going to be reduced in the trade agreement, both in terms of volume that will trigger a safeguard, and the tariffs themselves.
The declining trigger levels for the Japanese safeguard will be:
• Year 1 (2020); 242,000 metric tons (mt), with volume prorated down 1/365th for each day after March 31, 2020 if implemented after that date;
• Year 2 (2021); 242,000 mt;
• Year 3-9 (2022-2028); 4,840 mt more than the trigger level in the previous year;
• Year 10-14 (2029-2033); 2,420 mt more than the trigger level in the previous year; and
• Year 15 (2034) and beyond; 4,840 mt more than the trigger level in the previous year.
Safeguard tariff rates will be:
• Year 1 and Year 2 (2020-2021, assuming implementation on Jan. 1, 2020); 38.5 percent;
• Years 3-9 (2022-2028); 30 percent;
• Years 10-13 (2029-2032); 20 percent;
• Year 14 (2033); 18 percent;
• Year 15 onwards; a rate one percentage point lower than the prior year if no safeguard measures were applied, or the same rate as the prior year of safeguard measures were applied.
Additionally, the text of the agreement notes that if the safeguard is not triggered for four consecutive years after Year 14 (2033, assuming Jan. 1, 2020 implementation) then “Japan shall not apply any further agricultural safeguard measures” on U.S. beef imports.
The deal also will allow for more Japanese beef to come into the U.S. Part of the agreement, called the “Side Letter on Beef,” outlines the U.S. commitment. The U.S. will eliminate the existing 200-mt Japan-specific tariff quota on beef, increase the “other countries or areas” quota by 200 mt, and allow Japan access to this larger open quota.
The full details including texts of the trade agreement can be found online by visiting ustr.gov and searching for “U.S.-Japan Trade Agreement.”
Reactions from industry
As might be expected, the reaction from beef, trade, and agricultural groups was immediate and ecstatic.
“There’s just no other way to say it: This is a tremendous victory and a great day for America’s beef producers and Japanese consumers,” said National Cattlemen’s Beef Association President Jennifer Houston in the group’s official reaction to the news.
“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,” commented U.S. Meat Export Federation President and CEO Dan Halstrom. He noted that the value of beef and pork trade to Japan in 2018 was $3.7 billion.
North American Meat Institute President and CEO Julie Anna Potts stressed that the agreement will put the U.S. and our competitors on a more equal footing within the Japanese market.
“The U.S. will now be better positioned to compete with countries in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the European Union for valuable market share.”
“Now that the final hurdle to a deal with Japan has been cleared, American farmers and ranchers can count on increased market access for their products—from beef and poultry to fruits, vegetables and nuts,” said American Farm Bureau President Zippy Duvall in the group’s official response to the move.
“This is a big win for farmers, and we hope it’s the first of many trade deals to be approved that will open markets and level playing fields for American agricultural exports.”
Japanese reservations
Japanese news media greeted the passage of the deal in far less energized terms. Several stories last week in the Japan Times, an English-language daily newspaper, described the deal—and President Donald Trump, whose behavior was noted as unpredictable—in cautious terms.
“This Japan-U.S. trade agreement could serve as the equivalent of a bulwark against additional demands from President Trump,” Junichi Sugawara, a senior research officer at the Mizuho Research Institute, was quoted in one story. It also described the deal as a “case study for U.S. allies elsewhere” in the face of “the mercurial U.S. president.”
Professor of American politics Mieko Nakabayashi from Japan’s Waseda University was quoted suggesting Japan might be well served by “feigning defeat” in the trade deal as it might result in no additional “outrageous demands” from the U.S. Other sources quoted in Japan Times stories noted that the U.S. achieving parity with CPTPP countries on meat trade was a central goal for Trump.
“Since the U.S. fulfilled that goal, it is possible that the Trump administration may not be interested in reaching a more comprehensive deal,” Kazuhito Yamashita, an ag-focused research fellow at the Canon Institute for Global Studies was paraphrased as saying. — Kerry Halladay, WLJ editor
