The U.S. Department of Agriculture (USDA) issued a Fact Sheet Nov. 3, 2015, listing the key outcomes for U.S. agriculture as a result of the Trans Pacific Partnership (TPP). USDA stated Japan in 2014 ranked fifth in purchasing U.S. agricultural products behind China, Canada, Mexico and the European Union. The total food and drink market in Japan is valued at over $650 billion. USDA boasts that U.S. producers export $13 billion in U.S. agricultural exports to Japan. The Fact Sheet claims TPP will “…significantly improve access opportunities for the most sensitive products in Japan through a mixture of tariff cuts and expansion of access under tariff rate quotas.
Interestingly the Fact Sheet never mentions any of the Japanese tariff rates. It asserts that U.S. ranchers export beef and beef products in the amount of $1.6 billion in 2014. It also indicates Japan will eliminate duties on 74% of beef and beef product imports in 16 years. The actual tariff rates are never mentioned.
Pork and pork products exported to Japan from the U.S. was $1.9 billion in 2014. This amount compared to $650 billion appears pretty insignificant. USDA describes Japan as highly protective of its pork industry but claims under TPP Japan will eliminate tariffs on 65% of pork products within 11 years and reduce tariffs even more within 16 years.
An examination of the 1,133-page Tariff Schedule of Japan is enlightening. On page 24, category “Meat of swine” is listed. The first category describes the products of hams, shoulders and cuts thereof, with bone in. The staging category indicates it will be 11 years before Japan allows these products in for free. The same is true for prices of processed meat of swine. The description in the Tariff Schedule is most interesting. (Interpret this language?) For example, the tariff shall be levied on “…each kilogramme, in value for customs duty, not more than gate prices for the specific duty applied on processed meat of swine where the gate prices shall be obtained by dividing Prices A by Rate B plus 0.6, and multiplying by 1.5, the same definition shall be applied in this heading and heading 16.02.”
USDA in its Fact Sheet never gives you this language but tells you it is a good deal. Maybe it is? The world production of pork products is approximately 95 million metric tons. Japan produces approximately 1.3 million tons of pork and consumed approximately 2,484 metric tons in 2013. The U.S. exports approximately 350,000 MT of pork to Japan annually. Japanese pork production appears to be decreasing as well.
For the next 11 years, the tariffs will be reduced on pork products. The Tariff Schedule refers one to JPB11 in each column. To interpret JPB, one must refer back to Annex 2-D which is entitled General Notes on the tariff classification for Japan. Then one must turn to page 6 where there is an entire section on leveling customs duties on any product which will become duty free after 11 years.
Beef products, according to USDA, will receive “dramatically” reduced tariffs over 16 years. On page 7 of Japan’s Tariff Schedule, it lists the meat of bovine animals, fresh or chilled. Presently the tariff rate on beef carcasses, other cuts with bone in, brisket and plate, boneless and loins pay a tariff of 38%. When TPP becomes effective, the tariff in year one will be reduced to 27.5% and is slowly reduced to 10.8% by year 15. In year 16 and all subsequent years, a flat 9.0% tariff will be charged on beef imports.
It is interesting to note the pages which follow beef and pork cover fish. Virtually all categories come in tariff free with the exception of salmon. Tariffs on salmon appear to end in approximately 8 years. This is good negotiation?
This is the fifth article in a series where Gary Baise explores the TPP.
Sept. 20, 2016 - Deeper analysis on potential Pacific trade pact: Japan
Sept. 8, 2016 - Deeper analysis on potential Pacific Trade Pact: Chile
Aug. 22, 2016 - TPP Annex 2-D tariff commitments - Canada
Aug. 17, 2016 - Attempting to understand Trans Pacific Partnership
The opinions of the author are not necessarily those of Farm Futures or Penton Agriculture.