Japan and Australia trade agreement lowers tariffs on Aussie beef
April 21, 2014
Japan and Australia reached a free trade agreement Monday that has major implications for agriculture worldwide. The trade deal between Japan and Australia will lower tariffs on Australian beef and will raise the duty-free quota on cheese, Australia's largest dairy export to Japan, among other things. The trade agreement was passed after seven years of negotiation.
According to the Australian Government Department of Foreign Affairs and Trade, "The Japan-Australia Economic Partnership Agreement will give many Australian producers and exporters a significant competitive advantage. More than 97 percent of Australia's exports to Japan will receive preferential access or enter duty free when JAEPA is fully implemented."
Tariffs on frozen beef from Australia, currently at 38 percent, will be reduced to 19.5 percent over the next 18 years. The tariff on fresh beef will be reduced to 23.5 percent over 15 years.
In exchange, the cost of Japanese cars in Australia may go down by as much as $1,500 apiece, thanks to an elimination of the five percent tariff on automobile imports from Japan, according to Andrew Robb, Australian trade minister. Tariffs on household goods and electronics are also being eliminated, though tariffs on rice will remain unchanged.
"The good part is that Japan has finally agreed to reduce some of the tariffs on agriculture products, which is something we've been wanting for a long time," said Bob Mack, a farmer, rancher, cattle feeder and chairman of the South Dakota Stockgrowers Association's trade committee, from Watertown, S.D. "Hopefully in the negotiations that are ongoing they'll reduce some of the tariffs on the U.S. products. Some of the numbers I've seen state that we could see our Japanese market reduced by as much as 80 percent because of the Australian advantage."
Japan and Australia are both part of the Trans-Pacific Partnership, led by the U.S., that has been working to develop a free trade agreement among 12 countries. One of the major sticking points in negotiations that have been going on since 2010 is the United States' requirement that all tariffs be eliminated. Japan has been insistent on keeping tariffs in place to protect its rice, wheat, beef, corn and pork producers from the competition that elimination of agricultural tariffs would bring.
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Bob McCan, president of the National Cattlemen's Beef Association said the agreement between Japan and Australia that only reduces tariffs will diminish what the TPP has been working toward. "NCBA is deeply concerned that the bilateral trade agreement between Japan and Australia does not call for full tariff elimination. This bilateral agreement undermines the long-standing goals and principles that are the base of the Trans-Pacific Partnership. This development only pushes the high-standing ideals of TPP further out of reach for all countries involved, and it is not a move that U.S. beef producers can support. The TPP has been referred to as a 21st century agreement, but this bilateral agreement is from the 20th century playbook and will not serve to foster open trade and certainly will not benefit consumers and producers globally."
"Global trade is a complicated thing," Mack said. "As producers we don't have a lot of say in what goes on, but we get to suffer along with it."
Some are speculating that Japan is using this agreement with Australia as leverage in the TPP negotiations. Aurelia George Mulgan, a professor of Japanese politics at University of New South Wales, said in a BBC article that the U.S. would be under pressure to agree to a deal that puts it on a level playing field with Australia.
"Japan knows that America wants it on board, because TPP without Japan is not much worth all that much. Japan is playing hardball," she said.
Ed Blair, a cattle producer and appointee to the U.S. Department of Agriculture's Agricultural Technical Advisory Committee from Vale, S.D., agrees. "Japan will use this as a bargaining chip. They will use this as leverage against the U.S. in the TPP."
Blair said that if the U.S. cattle producers could get a level playing field they could compete with any country in the world. "We've got a readily-available supply of feed grains, infrastructure to move commodities and the ability to ship it overseas. Ninety-five percent of beef customers are outside the U.S. Trade has added a lot of value since 2003, when we were able to get back into other countries. To grow our beef industry we've got to have trade."
Bill Bullard, CEO of R-CALF USA, grants that the new trade agreement between Japan and Australia may give Australian beef a price advantage in Japan, but says he believes there will continue to be a considerable market in Japan for the corn-fed beef the U.S. produces, "While this may give Australia a price advantage, I believe we still have a quality advantage," he said.
He also points to strong domestic demand for beef as more of a consideration for U.S. cattle producers than foreign markets. "This trade agreement is more likely to affect countries like Canada than the U.S.," Bullard said. "Canada overproduces beef for their domestic market. It's forced to export to maintain viability within their industry. The U.S. hasn't been able to meet domestic demand in over 40 years. The U.S. isn't dependent on exports to maintain a viable cattle market here. The cattle industry is unique, not only because it's the largest segment in American agriculture, but, unlike other large segments—corn, wheat, cotton—we don't overproduce for our market. That's a significant factor when looking at global trade."
Bullard points out that when Japan closed its borders to U.S. beef because of BSE, cattle prices didn't take much of a hit. "U.S. cattle producers continued to receive the highest nominal prices in the history of the industry, which clearly reveals that the most important market to U.S. cattle producers is right here at our feet."