Japan’s new trade agreements with Australia, New Zealand and the EU are leaving the U.S. as the odd man out in the most appealing cheese market in the world.
That’s because those agreements will phase out import tariffs, putting the U.S. at a significant disadvantage that will find Japanese buyers shopping elsewhere, according to a new study by Tokyo-based Mercos Consulting.
Released on Wednesday, the report was commissioned by the U.S. Dairy Export Council and National Milk Producers Federation to provide new ammunition to U.S. negotiators on the critical need for a strong U.S.-Japan trade agreement.
USDEC and NMPF wanted to get a handle on the size of the threat, and the numbers mount up quickly, Shawna Morris, vice president of trade policy for the organizations, said.
Without equal access to Japan, the U.S. could lose half of its market share and about $1.3 billion in sales over the next 10 years, she said.
That toll climbs to $5.4 billion in lost sales when Japan’s agreements with Australia, New Zealand and the EU are fully implemented, the study found.
Some companies are already reporting pressure from Japanese importers. The longer the U.S. goes without a trade agreement, the more likely it is to affect sourcing decisions, she said.
“We do have a little bit of a window here, but the impetus is to move quickly to close that gap,” she said.
There was a lot of momentum in November and December, but the government shutdown certainly didn’t help the situation, she said.
“There’s a lot of opportunity for both sides to come together. It makes a lot of sense for both sides to roll up their sleeves and stay committed to the process,” she said.
There’s a lot at stake and a lot of potential as well for U.S. dairy exports, she said.
Japan is the fourth-largest market for U.S. exports, accounting for about $291 million in 2017 and about 5 percent of all U.S. dairy exports. Almost half of that export value was in cheese exports.
Japan is the second-largest cheese importer in the world, and its cheese imports are expected to show a 1.6-fold increase in the next 10 years. If the U.S. has the same market access as competitors, its share of Japan’s cheese market could go from 13 to 24 percent with a 3.3-fold increase to $466 million.
“There’s a very strong possibility to expand the market and grow exports. That’s why it’s so important to have a solid, strong agreement and a swift one,” she said.
Japan’s trade agreement with Australia and New Zealand through the Comprehensive and Progressive Agreement for Trans-Pacific Partnership entered into force on Dec. 30, and the Japan-EU Economic Partnership Agreement enters into force on Feb. 1.
Both agreements include major agricultural supplies and provide a strong indication of the floor, she said.
“We think the opportunity exists to press a little further,” she said.
The organizations are hoping an agreement with Japan will include some good precedents set in the U.S-Mexico-Canada Agreement in regard to cheese names and geographic indications and sanitary and phytosanitary standards, she said.