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Published 3:10 pm Wednesday, September 25, 2019
President Donald Trump and Japanese Prime Minister Shinzo Abe on Wednesday announced major progress on a new trade agreement between the two countries.
The Japanese Parliament is expected to approve the agreement, which mainly relates to agriculture, later this fall. It may take effect as early as Jan. 1, 2020, according to the American Farm Bureau Federation.
“I was actually in the room with one of the biggest millers in Japan last November and they said, ‘Absolutely no bilaterals,’ but yet here we are with a bilateral agreement,” said Darren Padget, Oregon Wheat Commission board member and vice chairman of U.S. Wheat Associates, the overseas marketing arm for the industry. “So it can be done.”
Since the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) agreement entered into force last December, market factors have kept U.S. wheat competitive, according to U.S. Wheat and the National Association of Wheat Growers.
Without this new agreement, the organizations say, U.S. wheat imports would have become less and less cost competitive to the point that Japan’s flour millers would have had no other choice than to buy more of the lower cost wheat from CPTPP member countries.
The agreement is “in many ways the same” as the original Trans-Pacific Partnership, from which Trump withdrew in January 2017, said Dave Salmonsen, senior director for congressional relations at the Farm Bureau.
No action by Congress is necessary, as this is not a full trade agreement that involves substantive changes to existing U.S. law, according to the Farm Bureau.
“Most of the changes in tariffs are happening on the Japanese side,” Salmonsen said.
The agreement covers agriculture, digital commerce and some industrial tariffs, said Salmonsen.
Wheat and other products will have guaranteed access to Japan through quotas.
A second phase of negotiations will likely include updates on sanitary and phytosanitary rules that were included in TPP and some market access discussions for rice, Salmonsen said.
Padget, who attended Wednesday’s announcement, praised U.S. Trade Representative Robert Lighthizer and Chief Agricultural Negotiator Gregg Doud and their teams for their work on behalf of U.S. farmers.
“It was just a good day,” Padget said.
According to the Office of the U.S. Trade Representative:
• Total impact: Of the $14.1 billion in U.S. food and agricultural products imported by Japan in 2018, $5.2 billion were already duty-free. Under this first-stage initial tariff agreement, Japan will eliminate or reduce tariffs on an additional $7.2 billion of U.S. food and agricultural products. Over 90% of U.S. food and agricultural imports into Japan will either be duty-free or receive preferential tariff access.
• Tariff reductions: Japan will reduce tariffs on products valued at $2.9 billion in stages. Among the products benefiting from this enhanced access will be fresh and frozen beef and pork.
• Tariff elimination: Tariffs will be eliminated immediately on over $1.3 billion of U.S. farm products including, for example, almonds, blueberries, cranberries, walnuts, sweet corn, grain sorghum, food supplements, broccoli and prunes.
• Staged tariff elimination: Other products valued at $3.0 billion will benefit from staged tariff elimination. This group of products includes, for example, wine, cheese and whey, ethanol, frozen poultry, processed pork, fresh cherries, beef offal, frozen potatoes, oranges, egg products, tomato paste.
• Country Specific Quotas (CSQs): For some products, preferential market access will be provided through the creation of CSQs, which provide access for a specified quantity of imports from the U.S. at a preferential tariff rate, generally zero. CSQ access will cover wheat and wheat products, malt, glucose, fructose, corn starch, potato starch and inulin.
• Mark Up: Exports to Japan of wheat and barley will benefit from a reduction in Japan’s “mark up” on those products. Japan’s imports of U.S. wheat and barley were valued at more than $800 million in 2018.
• Safeguards: This agreement provides for the limited use of safeguards by Japan for surges in imports of beef, pork, whey, oranges and race horses, which will be phased out over time.
• U.S. tariffs: The U.S. will provide tariff elimination or reduction on 42 tariff lines for agricultural imports from Japan valued at $40 million in 2018. Products include some perennial plants and cut flowers, persimmons, green tea, chewing gum, some confectionary products and soy sauce
The U.S. has also agreed to modify its global WTO tariff rate quota for imports of Japanese beef, enabling Japanese producers to compete for a larger share of the global TRQ quantity.