Japan and the European Union recently reached a basic accord regarding the Economic Partnership Agreement. However, although the deal includes decisions that could hit much harder on domestic farmers than the Trans-Pacific Partnership agreement, the negotiations were all held behind closed doors with barely any debate conducted on the issue.
The government appears to believe that no further debate on the TPP agreement is necessary since it is already approved by the Diet, but it is a great mistake to think so.
Impact of EPA greater than TPP
Concerning dairy products, the Japanese government made concessions in the EPA which are even greater than in the TPP talks. It agreed to set a low-tariff import quota of 31,000 tons for soft cheeses and eliminate cheese tariffs after a 15-year phase-out period. Specific tariffs and quotas for skimmed milk powder and butter will become tariff-rate quota of 15,000 tons in milk equivalent at reduced rate over five years. Tariffs on beef and pork will be reduced to the same level as in the TPP agreement. The specific duty on low-price pork cuts will be reduced from 482 yen per kg to 50 yen by year 10, and the ad valorem duty on beef will be slashed from 38.5 percent to 9 percent in 16 years.
Such measures could pose a serious threat on domestic dairy and stock farmers. Elimination or reduction of tariffs on cheese and butter would mean there would be less buyers of raw milk. The damage could be especially large for Hokkaido, the major dairy farming region, and if raw milk produced in Hokkaido is sold as milk for consumption instead of for processing, it could lead to price drops in the domestic market. The government is much to blame for settling the talks under the table.
That is not all. Influx of cheap pork products could have an impact on Japan’s rice farming as well. The government decided to end its rice production control policy and is encouraging farmers through subsidies to shift to production of rice for livestock feed. But if large cuts in pork and beef tariffs lead to increase in imports of the meats, there would be less demand for such rice.
A chance for U.S. to make tougher demands
Furthermore, it is highly likely that U.S. President Donald Trump will take the latest trade agreement as an opportunity to step up pressure on Japan to launch bilateral trade negotiations with the U.S. The so-called “Russiagate” scandal is putting the Trump administration in an ever more serious situation, and if the president’s Republican Party loses the midterm election next year, Trump could face impeachment proceedings. In order to win the election, it will become critical for Trump, who has pledged to put “America first,” to strike a trade deal favorable for his own nation.
The Trump administration has withdrawn from the TPP agreement and is seeking to renegotiate its trade deal with South Korea. When Trump met with Prime Minister Shinzo Abe in Germany this month on the sidelines of the Group of 20 summit meeting, he raised the issue of the need to reduce the U.S.’ trade deficit with Japan. It is a matter of time before Trump starts asking for bilateral trade negotiations.
In the negotiations, the Trump administration will inevitably try to get more concessions from Japan than those made for the Japan-EU EPA. It is hard to think that the Abe administration can stand up to the pressure. Our concerns continue to grow.
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