WASHINGTON, D.C., U.S. — U.S. President Donald Trump and Japanese Prime Minister Shinzo signed a trade agreement on Sept. 25 that lowers or eliminates tariffs on many U.S. ag products and increases market access for U.S. ag producers in Japan.
According to the U.S. Department of Agriculture (USDA), out 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.
Preferential market access will be provided for some products through the creation of Country Specific Quotas (CSQs), which provide access for a specified quantity of imports from the United States at a preferential tariff rate, generally zero. CSQ access will cover:
- wheat products
- corn starch
- potato starch
The USDA said exports to Japan of wheat and barley will benefit from a reduction to 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.
In the U.S.-Japan Trade Agreement, Japan has committed to provide substantial market access to U.S. food and agricultural products by eliminating tariffs, enacting meaningful tariff reductions, or allowing a specific quantity of imports at a low duty (generally zero). The tariff treatment for the products covered in this agreement will match the tariffs that Japan provides preferentially to countries in the CP-TPP agreement.
“The past two years have underscored just how important global trade is to agriculture and rural communities,” said Collin C. Peterson, U.S. House Agriculture Committee chair. “I’m glad to see some progress made on tariff reductions in this agreement that will help American farmers and ranchers catch up on some of the access we lost when the administration pulled us out of the Trans-Pacific Partnership. It’s only a piece of the puzzle though, and additional agreements with Japan will be needed to make all of U.S. agriculture competitive. I look forward to working with Ambassador Lighthizer, Ambassador Doud, and Secretary Perdue to address the remaining challenges with Japan and to open and restore other international markets for U.S. agriculture.”
The agreement levels the playing field for the U.S. wheat industry in Japan.
“This agreement puts U.S. wheat back on equal footing with wheat from Canada and Australia that currently have a tariff advantage under a separate trade deal,” said Doug Goyings, chairman of U.S. Wheat Associates (USW). “We applaud the negotiators from both countries who worked very hard to reach an agreement that is so important to wheat farmers and to their flour milling customers in Japan.”
Both the USW and National Association of Wheat Growers (NAWG) noted that when the tariff agreement is implemented, Japan’s effective tariff on imported U.S. wheat will drop to the same level Japanese flour millers now pay for Canadian and Australian wheat. Since the CPTPP agreement entered into force last December market factors have kept U.S. wheat competitive, the associations said. Without this new agreement, however, U.S. wheat imports would have become less and less cost competitive to the point that Japan’s flour millers would have no other choice than to buy more of the lower cost wheat from the CPTPP member countries.
“Resolving trade issues like this and building new opportunities for our wheat and other agricultural products is absolutely needed at a time when wheat farmers are dealing with another year of low prices and a depressed farm economy,” said Ben Scholz president of NAWG. “We are very grateful for the efforts that the staff and leaders at USTR and USDA put in to reach this agreement.”
The agreement eliminates tariffs on grain sorghum and the National Sorghum Producers (NSP) hope this is the first step in expanding into southeast Asia.
“We applaud negotiators from both countries for their hard work and foresight to build more opportunities for U.S. agriculture producers,” said Dan Atkisson, chairman of the NSP. “Japan has become a stable market for our farmers with growing interest from the consumer and feeding industries, and we look forward to increased market access, duty free, achieved through this agreement. We also feel this relationship with Japan marks an important step forward in further expanding trade relationships with southeast Asia where there are valuable market growth opportunities.”
With Japan being a top 10 export market for U.S. soybeans the American Soybean Association (ASA) is pleased with a trade deal focusing on continued market access.
“Japan has long been a valued and reliable trading partner for soybeans, and we appreciate that the agriculture component of this deal will assure continued market access for our beans and other ag products,” said Davie Stephens, president of the ASA. “As we go through the details of the agreement, we extend a thank you to the administration for finalizing this deal.”
The American Feed Industry (AFIA) supports the agreement but looks to future negotiations with Japan to address feed safety issues.
“I applaud President Donald Trump and Japanese Prime Minister Shinzo Abe for returning to the table to negotiate a bilateral trade deal that will put U.S. agricultural products back on a more-level playing field with its competitors in the region,” said Joel G. Newman, president and chief executive officer of the AFIA. “Japan is one of the U.S. animal food industry’s most valuable export markets, representing roughly a third of all exports for feed, feed ingredients and pet food products. As the two countries work toward negotiating an agreement beyond this initial limited trade deal on tariff reductions, we hope that they will address outstanding sanitary and phytosanitary and regulatory issues our industry faces.”
The U.S. Grains Council is encouraged by the agreement but also is looking toward future negotiations with Japan, particularly about ethanol.
“Japan is one of the largest and most loyal U.S. corn customers, having bought more than $2 billion of U.S. corn in the most recent marketing year,” said Ryan LeGran, president and CEO of the USGC. “It is an important market for food and feed barley and sorghum. And as a country looking to improve the environmental impact of its fuel, it is an important future market for U.S. ethanol products.
“While this is the first in several rounds of agreements yet to come and we hope to see continued improvement in the ethanol sector, this is a good first step. We encourage the administration to pursue broader access for all of agriculture and we move forward with our partner, Japan.”