FOOD BUSINESS NEWS


 

KANSAS CITY — The Trump administration’s “America first” doctrine will be put to the test in 2019. In addition to the ongoing trade war with China and questions about the legislative fate of the United States-Mexico-Canada Agreement, the United States must work rapidly to reach a bilateral trade accord with Japan.

American exporters to Japan will feel the effects of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, a multilateral trade agreement that went into effect on Dec. 30, and the European Union-Japan Economic Partnership Agreement, which also will go into effect this year. Without a bilateral trade agreement with Japan, which is the United States’ fourth largest agricultural trading partner behind Canada, China and Mexico, U.S. exporters will be at a significant disadvantage.

The United States was an original signatory of the Trans-Pacific Partnership in 2016, the precursor to the C.P.T.P.P., but President Donald Trump withdrew the United States from the agreement within days after taking office in January 2017. The administration expressed a preference for bilateral trade deals rather than multilateral agreements.

The remaining signatories of the C.P.T.P.P., which include Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam, concluded negotiations in 2018 and finalized the agreement. Under the C.P.T.P.P., producers from member countries will have greater access to export meat, dairy, produce and grains. Member countries within the C.P.T.P.P. will be able to sell their products at a tariff rate of approximately 10% below those of U.S. manufacturers and producers. A similar scenario will play out once the E.U., Japan agreement goes into effect.

The U.S. Meat Export Federation, a trade group representing the interests of U.S. beef and pork exporters, estimates that without a trade agreement beef exports to Japan are expected to decline from 43% of Japan’s beef imports today to 36% by 2023, and to 30% by 2028.

In testimony before the U.S. Trade Representative, Vince Peterson, president of the U.S. Wheat Associates, said the C.P.T.P.P. will grant preferential access to Canadian and Australian wheat exports to Japan. Eventually, the tariff reduction will be about $70 per metric ton, or 45% below the current effective tariff applied to U.S. wheat. Because Japan, the No. 1 buyer of U.S. wheat, has no obligation to change this tariff reduction schedule, Mr. Peterson said it will likely shut most U.S. wheat exports out of the Japanese market and undo decades of market development work.

This past September, the United States and Japan agreed to negotiate a bilateral free trade agreement. Public hearings to consider negotiating objectives were held in December and talks have reportedly begun. These are all signs of progress.

But even if a bilateral agreement is reached with Japan, the C.P.T.P.P. and the E.U. accords ensure U.S. manufacturers will face greater competition in the Japanese market. Such pressures are not new, and American exporters have proven adept in the past at competing successfully.

But the uncertainty that overshadows all current American trade efforts may undermine decades of work to establish a presence and thrive in the Japanese market. In the face of this uncertainty, the entire food industry has cause for great concern.