U.S. Pursuing Free Trade Agreement with Japan Could Boost Ag Exports

Japan might increase the amount of agriculture trade conducted with the U.S. through potential trade deal that was announced by President Donald Trump (right) following a meeting with Japanese Prime Minister Shinzo Abe (left). ( REUTERS/Joe Skipper )

Japan and the U.S. might be moving closer to potential trade negotiations with one another that would benefit American farmers and ranchers.

President Donald Trump and Japanese Prime Minister Shinzo Abe met on Sept. 27 where they discussed a number of topics including a possible bilateral trade agreement.

“We’ve agreed today to start trade negotiations between the United States and Japan. This was something that, for various reasons over the years, Japan was unwilling to do, and now they are willing to do so. We’re very happy about that, and I’m sure that we’ll come to a satisfactory conclusion,” Trump says.

The U.S. was in discussions with Japan for a free trade agreement prior to the Trump Administration stepping away from the Trans-Pacific Partnership (TPP) in January 2017. Despite walking away from TPP, the U.S. has worked to repair its relationship with Japan by exporting more value in beef and pork in the past year compared to 2015 and 2016. Since 2007 overall agriculture export values to Japan have increased by 17%, according to USDA.

“We’re doing much more business, much more trade with Japan right now, and things are working out very well,” Trump says.

Japan is the fourth largest trading partner for agriculture according to USDA data. Last year $11.9 billion worth of agriculture exports were sent to Japan from the U.S.

Potential for More Agriculture Trade

A number of trade organizations and agriculture officials supported the move by the Trump Admiration to work with Japan. 

“Achieving high-standard trade agreements is a top priority for American agriculture, and the announcement of the beginning of negotiations for a U.S.-Japan trade agreement is an important step in that process. This is welcome news, since we know that export income is critical to the financial health of agriculture and is a key contributor to rural prosperity. Japan is an important customer for our agricultural products and we look forward to the great potential this breakthrough represents,” says Secretary of Agriculture Sonny Perdue.

Red meat has seen gains in the Japanese market for a number of years. Data from U.S. Meat Export Federation (USMEF) shows that beef trade rose by 20.1% from 2016 to 2017 by value. Pork saw a more modest gain of 0.3% during the same time, but from 2015 to 2016 pork saw a 34.9% increase.

“Japan is the leading value market for U.S. beef and pork, and there is tremendous room for further export growth,” says USMEF President and CEO Dan Halstrom. “But for that to happen, tariff relief is absolutely essential so that U.S. red meat is on a level playing field with our main competitors. USMEF is very encouraged by the commitment to open negotiations on a U.S.-Japan trade agreement, with specific inclusion of agricultural market access. We hope to see rapid progress in these negotiations.”

Beef groups including the National Cattlemen's Beef Association (NCBA) and U.S. Cattlemen’s Association (USCA) were happy to see the U.S. and Japan working on a trade deal.

“Expanding market opportunities for U.S. beef exports to large consuming countries like Japan and Korea is an important objective for U.S. producers. With the U.S. withdrawal from TPP last year, there has been concern that U.S. beef would lose market share to one of our most important export markets - Japan. The joint statement indicating an intent of the U.S. and Japan to enter into negotiations holds the hope that U.S. producers will quickly be back on par with other major beef exporting countries who remained in the TPP. We are greatly encouraged by these recent actions and look forward to addressing our trade agreements with other countries with the same vigor,” says USCA President Kenny Graner.

“Today’s announcement is exciting news for America’s beef producers because Japan is our top export market, accounting for nearly $1.9 billion in U.S. beef sales in 2017. Unfortunately, U.S. beef faces a massive 38.5 percent tariff in Japan—a trade barrier that hurts America’s beef producers and Japanese consumers. NCBA has been a strong advocate for a bilateral trade deal between our nations and looks forward to working closely with the Trump Administration to secure increased market access for our industry. We congratulate President Trump and Prime Minister Abe for taking this important step in our trading relationship. The faster negotiations conclude, the faster U.S. producers can provide more Japanese consumers with the high-quality beef they demand,” says NCBA President Kevin Kester.

Concerns and Benefits for Dairy, Pork Access

The National Pork Producers Council (NPPC) also see Japan as a promising market after exporting more than $1.6 billion worth of pork to the country.

“This is fantastic news for America’s pork producers,” says NPPC President Jim Heimerl, a pork producer from Johnstown, Ohio. “Japan has been our top export market for years, so it’s good that the administration wants to solidify the relationship with that important economic and geopolitical ally. This is very positive for the U.S. pork industry, and it comes at a time when pork producers were having concerns about losing market share in Japan.”

Apprehensions by pork producers have arisen because the European Union recently established a free trade agreement with Japan and TPP will go into place without the U.S. as soon as early 2019.

“We look forward to working with the Trump trade team on bolstering ties with one of our most important trading partners,” Heimerl says.

One agriculture sector with some concerns over terms of a deal with Japan is the dairy sector. Officials from the U.S. Dairy Export Council (USDEC) are pleased to hear that a deal is in the works, but it is difficult to know what it means without further information.

“If this announcement means that Japan will offer no more than it did in the Trans-Pacific Partnership or its agreement with Europe, it would be disappointing and extremely unfortunate that we let an opportunity to robustly open the Japanese dairy market slip away once again,” says Jaime Castaneda, USDEC senior vice president. “Dairy farmers need strong new export avenues for the full variety of dairy products the U.S. produces.”

Removing tariffs on U.S. products should help with market access according to American Farm Bureau Federation President Zippy Duvall.

“Despite substantial tariffs that limit our farmers’ and ranchers’ potential to access Japan’s food and agriculture markets, in 2017 Japan was the fourth-largest market for our agricultural goods,” Duvall says. “There is great potential for our farm exports in Japan if we remove Japanese trade barriers. Now that there is increased competition for the Japanese market due to Japan’s trade agreements with other nations, there is an urgent need to hammer out a trade agreement between our two nations.”

The U.S. recently renegotiated the KORUS trade deal with South Korea earlier in the week pointing to more trade wins, like Japan, for agriculture down the road.