A Bad Deal

Multiple trade pacts will likely lower U.S. wheat exports to Japan.

Japan’s new trade pacts with Europe and the Trans-Pacific Partnership means U.S. trade negotiators will need to harvest new markets for America’s wheat farmer, Image by Pamela Smith

Wheat growers in the U.S. are likely to lose some ‌market share in Japan in the coming years ‌because of a free-trade agreement between ‌Japan and the European Union, and the newly constituted Comprehensive and Progressive Agreement for Trans-Pacific Partnership (TPP). That’s according to a new report from The Foreign Agricultural Service (FAS), “Competitive Field Tilts Against U.S. Wheat in Japan.”

Wheat Woes. The report highlights the impact of two trade deals in Japan that would lower tariffs on a variety of wheat products, including pasta and flour. The U.S. was responsible for 45% of Japan’s wheat imports--about $630 million of the country’s $1.4 billion total. However, the U.S. could lose more of the wheat market as the EU/Japan deal comes into force as early as 2019.

Japan is also championing changes under the TPP as countries work to implement the trade pact without U.S. participation. President Donald Trump withdrew the U.S. from the Pacific trade deal in 2017.

P[] D[x] M[x] OOP[F] ADUNIT[] T[]

The FAS report notes Japan concluded talks with the EU in December 2017, and several of the tariff reductions offered to Europe “largely resemble the concessions that Japan made in the Trans-Pacific Partnership agreement negotiation.”

The TPP includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. There are indications that Great Britain is considering joining the trade partnership, as well.

Currently, roughly 95% of Japan’s wheat comes from three U.S. varieties of dark northern spring, western white and U.S. hard red winter wheat, as well as Canadian western red spring wheat and Australian standard white wheat.

Tariff Changes. Under the EU and Pacific trade pacts, Australia, Canada and Europe would see increases in tariff-free export volumes to Japan, and the markup of tariffs for additional volumes of wheat would be cut by 45% over time.

While Japan imports small volumes of processed wheat through flour, wheat starch or baking mixes, the EU and TPP trade deals also would increase the quotas of tariff-free volumes for those products, as well. The EU and Turkey are currently the dominant exporters of pasta products to Japan, but the U.S. also maintains a 14% market share of those products.

The report comes after leadership from the U.S. Wheat Associates and National Association of Wheat Growers (NAWG) wrote the Office of the United States Trade Representative (USTR) in October to “strongly urge” it to pivot away from renegotiating trade deals to opening new markets. The statement came after the U.S. had announced renegotiations over the South Korea free-trade agreement.

“While we disagreed, the president made clear that he did not support the Trans-Pacific Partnership. We were promised a series of bilateral trade agreements in its place,” said NAWG CEO Chandler Goule at the time. “USTR has limited resources--it is time to get past plowing the same fields and start opening ground in new markets. Right now, we are standing around watching the world pass us by on trade agreements.”

[PF_0318]

Past Issues

and