U.S. trade officials are still negotiating with China, with U.S. lawmakers on the U.S. Mexico-Canada Trade Agreement. But it appears they are gaining ground on one major trade agreement, opening up new opportunities for U.S. ag exports.
The lower house of Japan's parliament on Tuesday, Nov. 19, approved the U.S. trade deal that would slash tariffs and set up new quotas for U.S. farm goods, according to reports out of Tokyo.
Passage by the lower house sends the pact for consideration by the upper house of Japan's Diet and U.S. officials are hopeful that a quick, full ratification will allow the trade deal to go into effect within several weeks.
U.S. President Donald Trump and Japanese Prime Minister Shinzo Abe signed the deal in late September.
About 88% of the roughly $14.1 billion worth of U.S. ag exports to Japan would be either tariff-free or receive preferential treatment once the new deal is in place, a senior U.S. government official told reporters.
The pact, which is tentatively scheduled to be implemented Jan. 1, goes much of the way toward restoring the additional market access U.S. ag exporters would have gotten if the U.S. had not pulled out of the Trans-Pacific Partnership, U.S. government officials said. While there are some exceptions - most notably rice and dairy - conditions under the new deal would put U.S. ag commodities under equal tariff treatment as ag commodities from TPP countries.
The 11-nation trade pact was renamed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership after the U.S. exited.
Japan has agreed to eliminate all tariffs immediately upon implementation for products like almonds, blueberries, walnuts, sweet corn, sorghum and broccoli. Japan also will begin phasing in lower tariffs on products such as beef, pork, wine, cheese, whey, ethanol and oranges. Separately, Japan has agreed to erect new quotas for U.S. wheat, malt, potato starch, glucose, fructose, cornstarch and insulin.
A U.S. government official confirmed that U.S. rice did not gain any new access to Japan and some U.S. dairy products did not benefit. Still, this is expected to be just the first in a series of segmented trade deals, the official said.
"In the first stage of this agreement, rice was not covered," the U.S. official said. "Today Japan is our second largest rice market ... and obviously we're going to continue to work on this as we continue to negotiate with Japan."
Japan agreed to give TPP-level tariff treatment to about 80% of U.S. dairy products exported to Japan, but there "are a couple categories where we were unable to improve access," the official told reporters.
International Dairy Foods Association President Michael Dykes called the new pact "a step in the right direction" that will help, but doesn't give dairy processors all they needed.
"While early reports indicate this deal does not fully achieve the same tariff rate reductions as those negotiated under the abandoned Trans-Pacific Partnership or the EU-Japan deal, it should deliver those benefits to cheese and whey - two of our largest exports to Japan," Dykes said.
Farm groups pleased
Nevertheless, the new U.S.-Japan Trade Agreement drew robust applause from some farm groups and lawmakers.
"For the past few years, U.S. beef producers have benefited greatly from growing demand for U.S. beef in Japan," said National Cattlemen's Beef Association President Jennifer Houston. "While Japanese consumers enjoy high quality U.S. beef, they unfortunately pay a higher price for U.S. beef due to the massive 38.5 percent tariff. Removing that tariff allows more Japanese consumers to enjoy more U.S. beef at a more competitive price."
Wheat growers and exporters are also pleased.
"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 U.S. Wheat Associates Chairman Doug Goyings, when the agreement was first announced.
The U.S. pork sector is excited, too.
Japan - the largest value market and second largest volume market for U.S. pork - agreed under TPP to eliminate a 20% tariff on ground pork and a 10% tariff on sausage within six years. Japan also agreed to immediately cut in half a 4.3% tariff on all fresh, chilled and frozen pork as well scale back its "gate price" system that's often used to set prices on imports in an effort to favor domestic product.
"We've seen market share declines in Japan ... since the start of the year when international competitors gained more favorable access through new trade agreements," said National Pork Producers Council President David Herring. Once implemented, he said the agreement puts U.S. pork back on a level playing field with our competitors in Japan.