Japan and Australia reached a basic accord on an economic partnership agreement on Monday, April 7, making it Japan’s first agreement with a major exporting nation of agricultural products.
While the two nations agreed on the most controversial issue of tariffs on beef, the tariffs will be reduced gradually over a long period of time and Japan will be allowed to take a safeguard measure of raising the tariffs to the original level if imports exceed a certain level. This virtually means low tariffs will be applied only to imports within a certain quota. Such measures reflect the Japanあese government’s intention to minimize the impact of beef imports on domestic cattle breeders.
Other key farm products including rice, wheat, sugar, butter and powdered skim milk are exempted from negotiations on the basic accord.
In the negotiations, the biggest focus was placed on tariffs on beef, especially refrigerated beef. This was because refrigerated beef is sold to consumers in retail stores and competes directly with domestic beef, whereas frozen beef is used mainly for processed foods.
Under the basic accord, the two nations agreed to reduce tariffs on refrigerated beef and frozen beef, both of which are currently set at 38.5 percent, over different time frames. Tariff on refrigerated beef will be reduced to 23.5 percent over a 15-year period, while that on frozen beef will be cut to 19.5 percent over a 18-year period.
The Australian government, pressured by farm lobbies calling for tariff abolishment, has been strongly insisting on “halving” the tariffs, and Tokyo sought ways to minimize the impact of tariff reduction on domestic cattle farmers while making compromises by expanding the degree of tariff cuts.
As a result, the two nations came up with a safeguard measure to allow Japan to raise the tariff rates back to 38.5 percent for imports which exceeded a certain amount. The measure will be applicable from this month to March next year, and will be triggered when the cumulative amount of imports exceeds 130,000 tons for refrigerated beef. The negotiators agreed to set the amount based on the lowest amount of imports in the five years up to fiscal 2012, which was roughly 127,000 tons marked in fiscal 2012. The level will be raised to 145,000 tons in 10 years.
As for frozen beef, the quota subject to reduced tariff for the first year will be 195,000 tons, set based on the average import volume in the five years up to fiscal 2012, which was around 194,800 tons. It will be raised to 210,000 tons in 10 years. Quotas will be renegotiated in the 10th year.
The total amount of quotas for beef imports will be 325,000 tons for the first year and 355,000 tons for the 10th year. The quota will grow 30,000 tons in 10 years, up 9 percent from the first year, an increase of about 10 percent compared with the actual amount of imports in fiscal 2012.
The Ministry of Agriculture, Forestry and Fisheries explained that Australian refrigerated beef competes directly with American beef in terms of quality and price, but only a little with Japanese dairy bred steers. The ministry believes that the impact of possible increase of Australian beef imports will be limited, as Australian beef does not compete with Japanese beef in terms of texture. Many worry, however, that tariff reductions will lead to drops in prices of imported beef and eventually bring about price declines in the beef market as a whole.
Meanwhile, negotiations for tariffs on butter and powdered skim milk, which would have a great influence on the supply-demand situation in the domestic raw milk market, were put off for future talks. As for natural cheese used to produce processed cheese, which is one of Australia’s biggest dairy exports to Japan, the quota for low-tariff imports was virtually increased. Currently, Japanese firms are allowed to import Australian natural cheese duty-free on condition that it is used along with domestically-produced natural cheese in the ratio of 2.5 to 1. Under the new accord, the ratio is changed to 3.5 to 1, effectively increasing the quota for Australian cheese while keeping the requirement to purchase domestically-produced cheese. Since domestic demand for cheese is expected to increase, the ministry predicts that a rise in imports of Australian cheese will remain within the quota.
Also under the accord, tariffs on bottled wine will be phased out in seven years.
The latest accord became the first EPA for Japan to include a chapter on food security, which states that from the standpoint of securing stable food supply, export control measures should not be maintained or newly established on such products as beef, wheat, dairy products and sugar.
(April 9, 2014)