Sunday’s announcement that the U.S. and Japan came to a preliminary agreement on trade is welcome news for the U.S. dairy industry.
Just a week earlier, a coalition of dairy organizations, companies and cooperatives sent a letter to U.S. Trade Representative Robert Lighthizer and USDA Secretary Sonny Perdue stating the urgent need to finalize an agreement.
“Obviously we’re encouraged by the news of an agreement in principle with Japan,” Jaime Castaneda, senior vice president of policy strategy and international trade for the U.S. Dairy Export Council and National Milk Producers Federation.
“We know dairy is included, we’ve been in lots of discussions with negotiators,” he said.
But the organizations don’t yet know the details of the agreement, whether U.S. dairy will have the same access it would have had in the Trans-Pacific Partnership or as much access as the European Union has through its agreement with Japan, he said.
President Trump pulled the U.S. out of the TPP shortly after he assumed office. That agreement included the U.S., Japan and 10 other countries. It went ahead without the U.S., renamed the Comprehensive and Progressive Trans-Pacific Partnership and went into effect for some of the countries in December.
The EU-Japan Economic Partnership Agreement entered into force in February.
USDEC, NMPF and the International Dairy Foods Association contend those agreements allowed the EU, New Zealand and Australia to position themselves to seize sales from the U.S. dairy industry in the Japanese market.
The U.S. industry still needs to determine the specifics of the deal with Japan for dairy, Matt Herrick, IDFA senior vice president for executive and strategic communications, said.
“We believe it is important that the United States and Japan reach a deal that will create a level playing field for U.S. dairy after having pulled out of the original Trans-Pacific Partnership,” he said.
A trade agreement with Japan is important to maintain U.S. market position with its third-largest export market for agriculture and fifth-largest for dairy and strengthen a critical relationship with Japanese consumers, he said.
“Without an agreement, market share for U.S. dairy would be diminished and we would fall further behind competitors like Australia and New Zealand,” he said.
The U.S. exported $270 million in dairy products to Japan in 2018. With dairy demand growing in Japan, there’s room to increase those sales.
But without a trade agreement, the U.S. stands to lose $1.3 billion in export sales to Japan over the next decade. That toll could climb to $5.4 billion once Japan’s agreements with the EU, New Zealand and Australia are fully implemented over 21 years, according to the groups.
With a level playing field, however, the U.S. can compete with anyone, Herrick said.
In addition to strong competition in the Japanese market, Japan is a very protectionist country and doesn’t give much market access for key products such as milk powder and butter, Castaneda said.
“We are encouraged and hopeful that we’re going to have an agreement in principle that meets the desires of our industry,” he said.