Commerce secretary: Ag central in U.S.-Japan trade

TOKYO — Resolving agricultural trade differences will help complete the Transpacific Partnership (TPP), giving businesses in both the United States and Japan greater access to the growing Asian middle class.

That was the main message Commerce Secretary Penny Pritzker delivered last week during a five-day business development mission to Japan and South Korea.

“We are making good progress in our agriculture and auto negotiations,” Pritzker said. “But we still have tough issues to work through. Strong outcomes in both of these areas are critical if we are to achieve the support needed at home to get this deal approved by our Congress.”

The 12 economies negotiating the TPP, which represent about 40 percent of global GDP, opened a new round of trade discussions in Sydney, Australia, on Oct. 25. Resolving agricultural differences, particularly Japan’s pork and beef tariff structure, has become central in TPP negotiations. Japan’s current offer in TPP negotiations demands an exemption for tariffs to remain on some agricultural products, including pork and beef.

Pritzker reminded her Japanese audience about the importance of the TPP. “Concluding this agreement will give manufacturers, farmers and ranchers in both of our countries access to markets on terms that allow them to compete fairly,” she said.

While Japanese Prime Minister Shinzo Abe supports trade liberalization, Japan’s agricultural cooperatives are opposing meat tariff changes. The beef price protections appear especially cherished, even as the amount of beef that Japan produces declines.

Beef

Japan’s beef output was down 2 percent in 2013, according to USDA Foreign Agricultural Service. Aging cattle farmers and competition from Australian and U.S. imports have contributed. Australia and the U.S. are the two largest exporters of beef into the Japanese market. 

Japan accounted for about one-fourth of U.S. beef export volume in 2013, 671 million pounds. That was up about 200 million pounds from 2011 and 2012. This year’s beef export to Japan, about 470 million pounds through August, is on pace with 2013. Japan is the largest export destination for U.S. beef; Canada is second.

The U.S. has steadily gained Japanese market share from Australian beef since Japan re-opened its market after a BSE-related ban on U.S. beef. Australia still views Japan’s high-value beef market as vital to maintaining Australian export value. 

“Australia continues to pursue a comprehensive outcome in the TPP that includes better market access for our exporters of agricultural products and commercially meaningful outcomes for Australian service providers and investors,” said Andrew Robb, Australia Trade and Investment minister, in comments made prior to the TPP talks opened in Sydney.

Pork

Japan was the largest importer of U.S. pork in 2013, receiving 1.34 billion pounds, or 27 percent of all U.S. pork exports by carcass weight. According to USDA, pork export volume to Japan is down 2.3 percent this year through August. But export value has increased because of higher pork prices. 

The USDA’s latest trade projection indicates that Japanese pork imports from the U.S. will surpass last year as Japanese importers seek bulk frozen pork to process. 

“Japanese ham and sausage manufacturers are reportedly keen to import raw material frozen cuts for the second half (of 2014), particularly picnic cuts from the United States, which is the only viable supplier of bulk volumes,” stated an August forecast from USDA’s Japan office. “Industry sources indicate that at the current, unprecedented pork import prices, processing picnic cuts (imported in mixed-cut shipments under the gate price system) into sausages and other ground pork products here in Japan may be more profitable than importing expensive seasoned ground pork, which is subject to a 20 percent ad valorem duty.”

That is an example of how pork import price and volumes can trigger different duties under Japan’s current tariff structure. The U.S. pork industry is advocating for that to change in the TPP talks. The National Pork Producers Council – along with hog industry groups from Australia, Canada, Chile, Mexico and Peru – has called on TPP negotiators to arrive at a “comprehensive, high-quality agreement that eliminates tariffs on all products, including pork.”