Not good news for American beef producers to end the week on. Japan just announced it’s triggering a tariff increase on U.S. beef imports, which means our product just got a lot more expensive for the consumers in what’s been a very valuable export market.A big part of the problem is not having a bilateral trade agreement with Japan. Thank Washington for not making that happen sooner. Here’s some reaction from agriculture:
The really interesting part is the note from the Meat Export Federation that says the increase in American beef imports really hasn’t hurt domestic supplies, with carcass and feeder cattle prices lower than in recent months, but prices are still at RECORD HIGHS.
WASHINGTON, July 28, 2017 – The government of Japan has announced that rising imports of frozen beef in the first quarter of the Japanese fiscal year (April-June) have triggered a safeguard, resulting in an automatic increase to Japan’s tariff rate under the WTO on U.S. beef imports. The increase, from 38.5 percent to 50 percent, will begin August 1, 2017 and last through March 31, 2018. The tariff would affect only exporters from countries, including the United States, which do not have free trade agreements with Japan currently in force.
U.S. Secretary of Agriculture Sonny Perdue issued the following statement:
“I am concerned that an increase in Japan’s tariff on frozen beef imports will impede U.S. beef sales and is likely to increase the United States’ overall trade deficit with Japan. This would harm our important bilateral trade relationship with Japan on agricultural products. It would also negatively affect Japanese consumers by raising prices and limiting their access to high-quality U.S. frozen beef. I have asked representatives of the Japanese government directly and clearly to make every effort to address these strong concerns, and the harm that could result to both American producers and Japanese consumers.”
U.S. exports of beef and beef products to Japan totaled $1.5 billion last year, making it the United States’ top market.
National Cattlemen’s Beef Association (NCBA) President Craig Uden issued the following statement in response to the tariff increase:
“We’re very disappointed to learn that the tariff on U.S. beef imports to Japan will increase from 38.5 percent to 50 percent until April 2018. Japan is the top export market for U.S. beef in both volume and value, and anything that restricts our sales to Japan will have a negative impact on America’s ranching families and our Japanese consumers. NCBA opposes artificial barriers like these because they unfairly distort the market and punish both producers and consumers. Nobody wins in this situation. Our producers lose access, and beef becomes a lot more expensive for Japanese consumers. We hope the Trump Administration and Congress realize that this unfortunate development underscores the urgent need for a bilateral trade agreement with Japan absent the Trans-Pacific Partnership.”
Background: Japan was the top export market for U.S. beef, valued at $1.5 billion in 2016. According to data compiled by the U.S. Meat Export Federation, first quarter U.S. beef sales to Japan increased 42 percent over 2016. In addition to the United States, the 50 percent safeguard tariff also applies to imports from Canada, New Zealand, and other countries that do not have a free trade agreement with Japan.
The U.S. Meat Export Federation also weighed in on Japan’s move:
“USMEF recognizes that the safeguard will not only have negative implications for U.S. beef producers, but will also have a significant impact on the Japanese foodservice industry,” explained U.S. Meat Export Federation (USMEF) President and CEO Philip Seng. “It will be especially difficult for the gyudon beef bowl restaurants that rely heavily on Choice U.S. short plate as a primary ingredient. This sector endured a tremendous setback when U.S. beef was absent from the Japanese market due to BSE, and was finally enjoying robust growth due to greater availability of U.S. beef and strong consumer demand. USMEF will work with its partners in Japan to mitigate the impact of the safeguard as much as possible. We will also continue to pursue all opportunities to address the safeguard situation by encouraging the U.S. and Japanese governments to reach a mutually beneficial resolution to this issue.”
As agreed to in 1994 in the WTO Uruguay Round, Japan maintains separate quarterly import safeguards on chilled and frozen beef, allowing imports to increase by 17 percent compared to the corresponding quarter of the previous year. The duty increases from 38.5 percent to 50 percent when imports exceed the safeguard volume. Japan’s frozen beef imports in the 2016 Japanese fiscal year were lower than in previous years, thus the growth in imports during this first quarter of the current fiscal year exceeded 17 percent, driven in part by rebuilding of frozen inventories and strong demand for beef in Japan’s foodservice sector. The most recent quarter saw strong growth in imports from all of Japan’s main beef suppliers.
The implications for U.S. beef exports are significant because U.S. frozen beef now faces an even wider tariff disadvantage compared to Australian beef. The duty on U.S. frozen beef imports, effective Aug. 1, 2017 through March 31, 2018, will be 50 percent while the duty on Australian beef will remain at the current rate of 27.2 percent, as established in the Japan-Australia Economic Partnership Agreement (JAEPA). The snapback duty of 50 percent will apply to frozen imports from suppliers that do not have an economic partnership agreement (EPA) with Japan, which are mainly the U.S., Canada and New Zealand.
Conditions have changed since the quarterly safeguards were established in 1994, and the growth in Japan’s imports this year has not adversely impacted Japan’s domestic beef producers. Prices for wagyu carcasses and wagyu feeder cattle are down from the record highs of last year, but are otherwise the highest in recent history. Japan has also moved away from the quarterly safeguard mechanism in its recent trade agreements. Through the JAEPA, Japan transitioned from quarterly safeguards to annual safeguards, which are much less likely to be triggered. The snapback duties on Australian beef have also been reduced, minimizing any potential impact on trade. Japan also agreed to similar terms in its economic partnership agreement with Mexico and in the Trans-Pacific Partnership (TPP).
Supplemental information on Japan’s imports of U.S. beef and possible implications of the safeguard are available in this brief USMEF fact sheet. Further analysis and charts are also available online.