Senior Staff Writer, Masaru Yamada – Washington D.C.
The United States’ agriculture will benefit the most from the Trans-Pacific Partnership free-trade agreement, while 70 percent of agricultural exports boosted by the pact will be shipped to Japan, leading to an influx of imports, according to a recent report by the U.S. Department of Agriculture.
The report, compiled by a group of experts in the department’s Economic Research Service, predicts changes in agricultural trade of the TPP’s 12 member nations. It compares a “baseline scenario” – simulation of projections between 2014 and 2025 under trade agreements and tariff reforms already committed to in the region – with a hypothetical TPP scenario which simulates trade under the condition that tariffs and tariff-rate quotas are completely eliminated by 2025.
It says that under the TPP scenario, the value of agricultural trade among TPP members is projected to increase 6 percent, or about $8.5 billion (at an exchange rate of some 116 JPY to the dollar), in 2025. It estimates the U.S. will supply about 33 percent, or $2.8 billion, of the expansion in intraregional agricultural exports. The report says increase in Japan’s exports, mainly processed products, will be $83 million, only 1.4 percent of the total.
Meanwhile, almost 70 percent, or $5.8 billion, of the expansion in intraregional agricultural exports will be Japan-bound, the report said. Almost half of the rise in Japanese imports will be for meat, followed by grains including rice, processed foods and dairy products, according to the report.
The predicted amount of export expansion for Japan would mean only a drop in the bucket in terms of improving its trade balance. The report’s simulations seem to completely ignore Prime Minister Shinzo Abe’s plan to increase exports of food products to 1 trillion yen by 2020.
On the other hand, the report’s estimates on the impact of the TPP agreement on Japan’s agriculture are extremely small compared to past projections made by the Japanese government and other institutions. For example, it estimates Japan’s rice production could decline 3 percent in terms of value, while the Japanese government’s prediction is a drop of 32 percent. The Japanese government predicts the nation’s value-term sugar production will entirely disappear, but the U.S. believes the output will decline only 2 percent.
“Japan’s large agricultural sector will change if a comprehensive TPP agreement is reached, but the overall effect would likely be modest,” the report says, based on their low predictions for production declines. “(The scenario results) suggest that most of Japan’s agricultural sector could become competitive within a TPP zone, even with intra-TPP tariffs eliminated.”
The simulations differ largely from Japanese estimates, because they don’t take into account non-tariff measures such as the gate-price system, which imposes tariffs based on price differences between standard domestic pork and imported pork, and the price adjustment system for sugar and starch. One of the writers of the report pointed out that the reasons for the differences in the two countries’ projected impacts include lack of sufficient amount of products in the international market which could be exported to Japan and Japanese consumers’ preference for domestically-made products.
(Nov. 13, 2014)