Abe’s Third Arrow Seen Striking Tariffs From Pork to BeefAya Takada
Japan, the world’s largest pork importer and Asia’s biggest buyer of beef, may agree to remove duties on meat after joining U.S.-led trade talks this month, a former adviser to Prime Minister Shinzo Abe said.
Abe won’t be allowed to exclude more than 5 percent of products during the negotiations, said Masayoshi Honma, a professor of agricultural economics at the University of Tokyo who advised Abe during his first term as prime minister in 2007.
Tariff elimination would expand opportunities for companies ranging from U.S. meat shipper Tyson Foods Inc. to New Zealand dairy exporter Fonterra Cooperative Group Ltd., while cutting costs for domestic food makers Nippon Meat Packers Inc. and Meiji Holdings Co. It could also rally opposition from Japanese farmers as the Liberal Democratic Party faces an upper house election this month that’s set to test the electorate’s support for policies dubbed Abenomics.
“Japan can only shield rice and sugar,” Honma said in an interview yesterday. “It will be difficult to protect dairy products because Australia and New Zealand are aiming to open up the sector, and the duties on pork and beef are already low compared with more sensitive items.”
Japan’s tariffs on imports of pork and beef are 4.3 percent and 38.5 percent, respectively, compared with 778 percent on rice, the nation’s staple.
Abe has set a goal of more than doubling food exports to 1 trillion yen ($10 billion) by 2020 as part of his growth strategy, the “third arrow” of an economic policy that started with unprecedented monetary easing and fiscal stimulus.
He’s championing Japan’s effort to join 11 nations in the planned Trans-Pacific Partnership free-trade agreement covering economies with combined annual output of $26 trillion.
Livestock producers are more efficient than grain growers in Japan and could survive without tariffs if the government supplements their incomes, Honma said. Japan imposes a 218 percent tariff on milk powder and 360 percent duties on butter, compared with 328 percent on sugar.
Inbound shipments of pork were 778,861 metric tons worth 409 billion yen in 2012, data from the agriculture ministry show. The U.S. was the largest supplier with 40 percent, followed by Canada with 22 percent.
Still, TPP members could displace 70 percent of Japan’s 907,000 tons of annual pork production, according to a government estimate made in March. They could take 68 percent of the 360,000 tons of beef produced in the nation each year, according to the projection.
Japan imported 515,108 tons of beef worth 221 billion yen last year. Australia accounted for 62 percent, followed by the U.S. with 26 percent. The government-affiliated Agriculture & Livestock Industries Corp. forecast that 30 percent of Japan’s 7.6 million tons of milk production could be displaced.
Japan’s ambassador to the U.S. said last month there’s urgency in overhauling policies that favor domestic industries as the government seeks to revive the economy and join the TPP talks. Negotiations will be held from July 15 to 25 in Malaysia.
“It’s obvious that Japan’s demand for food will shrink because of a declining and aging population,” said Satoshi Shimomura, director general at the government-affiliated Japan External Trade Organization. “Japan has to target the growing number of middle and upper-class consumers in other Asian markets.”
Consumers with disposable annual income of $35,000 or more will probably triple to 226 million people by 2020 in Asia excluding Japan, Shimomura said. Japan should focus on exporting premium beef and fruits, he said.
The third-largest economy already depends on imports for 60 percent of its food and ought to join the TPP to help exporters from Nissan Motor Co. to Sony Corp., Honma said.
Some members of Abe’s own party, backed by farming lobby groups, have asked the government to protect rice, wheat, sugar, beef, pork and dairy products or exit the talks.
Japanese farmers would lose a combined 348 billion yen in income each year if tariffs were eliminated, said Nobuhiro Suzuki, an agricultural science professor at the University of Tokyo.
“Japan’s entry into TPP means an influx of imports will drive local farmers out of business,” Suzuki said. “Doubling farm exports and income is just an empty promise.”
The TPP started in 2005 with Brunei, Chile, Singapore and New Zealand as a pact to open trade in goods, services and government procurement. Negotiations have extended to Australia, Canada, Malaysia, Mexico, Peru, Vietnam and the U.S., which aims to complete the TPP talks by the end of 2013.