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US beef could gain from Japan talks

Against a backdrop of tension with many of it’s key trading partners the US opened trade talks with Japan during April. Japan has always been a very important export destination US beef, being the number one international market for exports which last year exceeded $US 2 billion – almost one-fourth of the record $US 8.33 billion exported worldwide. However the CPTPP (Comprehensive and Progressive Trans Pacific Partnership) countries are rapidly gaining market share in Japan thanks to falling tariffs which give exporters such as Australia, Canada and Mexico a significant advantage over U.S. imports. Countries in the CPTPP will continue to see access into Japan increase as the agreement will cut tariffs on beef imports from member countries to just 9% by 2033.  

“U.S. beef cuts are still subject to a 38.5% tariff in Japan while our competitors’ rate is nearly one-third lower at 26.6%,”

Dan Halstrom, President and CEO of the US Meat Export Federation

The US is very keen to maintain its position within the Japanese market. The U.S. Agriculture Secretary Sonny Perdue recently participated in a barbecue event in Japan promoting US pork and beef. The US is worried that Japanese trade deals with other exporters such as the EU could further weaken their position in the market. In addition due to an ongoing trade dispute with China, US beef exports to that country are facing increased import requirements and retaliatory duties pushing the tariff rate to 37% in the Chinese market where Australia is also making headway.

The US was a founding member of the TPP (Trans Pacific Partnership) which became the CPTPP, until President Donald Trump formally stepped away from the agreement at the start of 2017. Without a trade agreement in place, the US share of Japan’s growing beef import market is expected to decline, from 43% to 36% by 2023, and to 30% by 2028. Due to widening tariff disadvantages and lost opportunities, US beef annual export losses by 2023 are estimated at $US 550 million, and will exceed $US 1.2 billion by 2028.

Exports have cooled in the first quarter of 2019. Beef exports to Japan were moderately lower than a year ago in March, but still finished the first quarter 2% above last year’s volume (74,147 MT) and 5% higher in value ($US 480.4 million). This was fuelled by growth in variety meat exports, with the US shipping more tongues and skirt meat to Japan.

The Japanese are also likely to be looking for a quick deal. Faced with an increasingly inward-looking US, Japan rushed to forge two mega regional trade pacts. Firstly, the renamed Comprehensive and Progressive TPP (CPTPP) and the Economic Partnership Agreement with the European Union (JEEPA). The 11 members of the CPTPP successfully signed the deal in March 2018; Japan and the EU signed their own agreement in July 2018. The Japanese fear a possible US tariff hike on auto-mobiles – Japan’s top export to the US and a major source of the American trade deficit, and this triggered their willingness to enter into negotiations.

Changes to non tariff barriers are equally important. The recent end of Japan’s 30 month rule on imported beef introduced in 2005 due to BSE will help US imports. Sonny Perdue, announced the breakthrough after meeting Japanese officials during the G20 Agriculture Ministerial Meeting in Niigata, Japan. The new terms, which took effect immediately allow US products from all cattle, regardless of age, to enter Japan for the first time since 2003.

The US Meat Export Federation estimates that expanded access could increase U.S. beef sales to Japan by 7% to 10%, which could be worth between $US 150 million to $US 200 million a year. Thus despite trade tensions and losing ground to CPTPP exporters in recent times the US looks set to maintain it’s position within the Japanese beef market.

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