Japanese “safeguard” tariff kicks in on U.S. frozen beef imports, something TPP would have alleviated
The Japanese government today increased its tariff rate on U.S. frozen beef imports to 50 percent as a result of rising imports of frozen beef from the United States and Australia.
Japan’s import tariff for these imports had been previously set at 38.5 percent, with the increased level effective through March 31, 2018.
While viewed as highly restrictive to U.S. beef producers, the tariff was still manageable against other overseas competitors. U.S. exports of beef and beef products to Japan totaled $1.5 billion last year, making it the United States’ top market, according to the U.S. Department of Agriculture.
Rising imports of foreign frozen beef during the first quarter of Japan’s fiscal year (April-June) triggered the country’s so-called import “safeguard,” which resulted in the automatic increase to Japan’s tariff rate for this product.
As agreed to during the World Trade Organization’s Uruguay Round of 1994, Japan maintains separate quarterly import safeguards on both frozen and chilled beef, allowing imports to increase by 17 percent compared to the corresponding quarter of the previous year. The import duty increases to 50 percent when these imports exceed the safeguard volume, the U.S. Meat Export Federation (USMEF) said.
“Japan’s frozen beef imports in the 2016 Japanese fiscal year were lower than in previous years, thus the growth in imports during this first quarter of the current fiscal year exceeded 17 percent, driven in part by rebuilding of frozen inventories and strong demand for beef in Japan’s foodservice sector,” the federation said. “The most recent quarter saw strong growth in imports from all of Japan’s main beef suppliers.”
The U.S. Department of Agriculture and the U.S. beef industry are deeply concerned that the higher import tariff will contribute to an immediate decline in U.S. frozen beef market share in Japan.
“This would harm our important bilateral trade relationship with Japan on agricultural products,” U.S. Agriculture Secretary Sonny Perdue said in a statement. “I have asked representatives of the Japanese government directly and clearly to make every effort to address these strong concerns, and the harm that could result to both American producers and Japanese consumers.”
The United States’ biggest frozen beef competitor in Japan is Australia, which prior to the import tariff increase commanded a 53.5 percent share of the Japanese market, with the United States second at 35 percent, USMEF said. Canada and New Zealand, meanwhile, each held a 4.5 percent market share in Japan.
Japan’s tariff on Australian frozen beef imports will remain at a much lower 27.2 percent level. Why? Because the duty rate was established by the Japan-Australia Economic Partnership Agreement (JAEPA). The snapback duty of 50 percent will apply to frozen beef imports from suppliers whose origin countries do not have economic partnership agreements with Japan, namely the United States, Canada and New Zealand.
Japan’s tariff on Australian frozen beef imports will remain at a much lower 27.2 percent level. Why? Because the duty rate was established by the Japan-Australia Economic Partnership Agreement.
Japan also agreed to similar terms for beef imports in its economic partnership agreement with Mexico and in the former 12-country Trans-Pacific Partnership (TPP), which the United States rejected earlier this year.
“There is a chance that demand in other Asian markets such as Taiwan, Hong Kong, South Korea and the Philippines could help limit downside price pressure, but Japan is by far the dominant market for U.S. short plate, so any slowdown in Japan’s imports is going to have an effect in the U.S. market (including on 50 percent trim) as well as across Asia,” USMEF said. “It is also not clear how many end users will be willing and able to shift to chilled U.S. beef, given the associated higher costs and timing/shelf life implications.”
Meanwhile, U.S. chilled beef accounts for 51 percent of Japan’s imports, while Australia commanded only 44 percent of this market, followed by New Zealand at 2 percent and Canada’s 1 percent.
Chilled beef is currently not under threat of Japan imposing safeguard tariff increases, but USMEF warned “if the higher duty on frozen beef causes [Japanese] importers to shift toward chilled product, this risk may increase later in the year.”