“Back on a level playing field”: US pork sector welcomes bilateral trade agreement with Japan

29 Aug 2019 --- The US National Pork Producers Council (NPPC) has welcomed a US trade agreement with Japan that, once implemented, is expected to place the nation “back on a level playing field with international competitors in one of its highest value export markets.” The agreement was announced at the G7 summit in France recently and signals a major opportunity to improve US access to Japan’s pork market. It comes at a critical time as US market share for pork in Japan is seriously declining due to Japan’s trade agreements with other countries.

“Japan is US pork’s largest export market by value. However, US pork has recently seen an erosion of Japanese market share. This is a result of new trade agreements formed by Japan with the EU and the signatory nations to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership [CPTPP] trade agreement, which does not include the US. The agreement in principle announced this week puts US pork producers back on a level playing field with international competitors,” a spokesperson of NPPC tells FoodIngredientsFirst.

One of President Trump’s first executive orders after taking office was to withdraw the US from the CPTPP deal, citing the preference for US bilateral, as opposed to multi-country, free trade agreements (FTAs). NPPC reacted by calling on US and Japanese government officials to ratify a bilateral trade agreement between the two nations.

US pork exports to Japan are expected grow from US$1.6 billion in 2018 to more than US$2.2 billion over the next 15 years with the new deal.Last September, the US and Japan agreed to negotiations aimed at further liberalizing trade between the two countries. 

Measured in terms of value, US pork exports to Japan totaled US$1.6 billion in 2018, notes Nick Giordano, Vice President & Counsel, Global Government Affairs at NPPC. “Since the conclusion of the World Trade Organization [WTO] Uruguay Round in 1993, when Japan partially liberalized its market access regime for pork, US pork sales to Japan have more than quadrupled to just under 394,000 metric tons in 2018,” Giordano highlights.

According to Dermot Hayes, Economist at Iowa State University, US pork exports to Japan will grow from US$1.6 billion in 2018 to more than US$2.2 billion over the next 15 years if the quickly gains access on par with international competitors. Hayes reports that US pork shipments to Japan will drop to US$349 million if a trade deal on these terms is not imminently reached with Japan.

US pork is highly dependent on exports, shipping more than 25 percent of total production to foreign markets, according to NPPC reports. Other NPPC trade priorities include ratification of the US-Mexico-Canada (USMCA) agreement, which preserves zero-tariff pork trade in North America, and resolving trade disputes with China that will enable US pork producers to capitalize on sales opportunities in the world’s largest pork-consuming nation.

Over the last 18 months, US pork producers have been hurt considerably by trade disputes. “Until recently, US pork faced 20 percent retaliatory tariffs in Mexico, our largest export market by volume,” says the NPPC spokesperson. “That dispute cost producers US$12 per hog, or US$1.5 billion on an annualized basis. Fortunately, that trade dispute was resolved and the retaliatory tariffs were removed in May of this year.”

The ongoing trade dispute with China continues to hurt US pork producers. “We currently face a 62 percent tariff rate – 50 percent of which is punitive – for exports to China. Last week, China announced plans to place an additional 10 percent retaliatory tariff on US pork. To date, the dispute with China has cost US pork producers US$8 per hog, or US$1 billion on an annualized basis,” explains the spokesperson.

Historically, China has remained in the top five US export markets. “Were it not for the current trade dispute, US pork producers would face an unprecedented sales opportunity in China as the world’s largest pork-consuming nation contends with African swine fever and a major reduction in domestic production,” says the spokesperson.

US opposition of multi-country trade agreements
In 2018, Japan reached trade agreements with nations in the CPTPP multi-country trade agreement, while reaching a similar deal with the EU. Under the terms of those agreements, Japan is providing a major reduction in duties on pork imports from the CPTPP countries.“Time is clearly of the essence for US pork,” asserts  Nick Giordano of NPPC.

The CPTPP was implemented on December 30, 2018, for the six countries that had ratified the agreement to that point – Japan, Canada, Australia, Mexico, New Zealand and Singapore.  On January 14, 2019, Vietnam also implemented the agreement. The first tariff cuts immediately followed implementation. Under the terms of the CPTPP, Japan’s duties under its “gate price” import regime for pork are significantly reduced, and will be further reduced over a period of ten years. 

The EU's trade agreement with Japan was implemented on February 1, 2019, with the first of a series of tariff cuts taking place on that date. The EU-Japan agreement effectively mirrors the CPTPP deal, with Japan’s tariffs on European pork being immediately reduced and then lowered again at regular intervals, leading to a major new opportunity for EU pork exports to Japan.

“Time is clearly of the essence for US pork. In 2019, US pork exports to Japan are already down 35 percent by volume,” asserts Giordano. NPPC is now urging the Trump administration to expeditiously sign and implement the trade agreement with Japan to prevent continued US pork market share loss in its top value export market.

By Benjamin Ferrer