Beef and pork stole much of the spotlight when President Donald Trump and Japanese Prime Minister Shinzo Abe signed off on a trade pact last week, but many of the U.S. winners will be American specialty crop farmers.
U.S. sales of oranges, blueberries, almonds, broccoli and other crops to Japan have been declining for months after Japan and 10 other Pacific Rim countries signed a massive trade pact that didn't include the U.S. That is expected to change next year if the new trade pact goes into effect on Jan. 1, as planned.
Japanese consumers love oranges, and California farmers love to sell oranges to the Japanese, but much less of that business has been taking place over the past several months as Australian exporters took a bigger bite out of the Japanese market.
"As Japan entered into agreements with other citrus producing trading partners the California citrus industry was put at a competitive disadvantage,” says California Citrus Mutual President Casey Creamer. “The new market access agreement immediately puts California fresh citrus in a position equal to the agreement reached previously between Japan and other nations."
But it wasn’t just Comprehensive and Progressive Agreement for Trans-Pacific Partnership countries that started horning in on the U.S. market share in Japan earlier this year, says Joel Nelsen, strategic adviser and past president of California Citrus Mutual.
Joel Nelsen, California Citrus Mutual
Coincidentally, Japan opened up its market to oranges from what Nelsen calls “low-cost producers” in Egypt and South Africa at roughly the same time that the CPTPP went into effect.
“So, the combination of all that pretty much helped erode about 25% of our market share,” Nelsen told Agri-Pulse.
But that should begin to turn around next year when Japan’s new, lower tariff rate is expected to be applied to U.S. oranges.
The official text of the U.S.-Japan pact still hasn’t been made public — and the U.S. Trade Representative isn’t saying why — but Nelsen said oranges will be treated better under the new deal than under the Trans-Pacific Partnership (the name and acronym was extended after the U.S. exited the deal in 2017).
Come Jan. 1, CPTPP member countries will be entering the second year of tariff cuts, and that is the level the U.S. will enter at for most commodities, putting U.S. producers on a level playing field with producers from Australia, Canada, Mexico, New Zealand, Chile and others, according to senior U.S. government officials.
But because of the unique complexity of oranges and Japan’s efforts to protect domestic producers, U.S. oranges will enter Japan’s market at essentially the third-year phase of tariff reductions. Japan’s tariff on U.S. oranges will drop from 32% to 25.6% when the pact is implemented, then drop again in 2021 to 20.4%. It doesn’t fall to zero until 2026.
That’s an accelerated version of the TPP schedule for oranges imported annually between Dec. 1 and March 31 — roughly the time period that matches U.S. harvest and exports. The Australians export later in the year so their oranges mainly coincide with a lower-tariff schedule (June 1 to Nov. 30) that reaches zero in 2023.
“It’s not going to happen overnight, but at least we can start rebuilding the market for California oranges,” Nelsen said.
Elizabeth Carranza, director of trade for the California Blueberry Commission, is even more optimistic.
“It’s a pretty big deal for us,” she said about the Japan deal that is expected to do away with all tariffs on U.S. blueberries next year. “Our domestic industry has been expanding pretty significantly over the past few years, so finding new export markets and maintaining those that we do have is crucial to our industry.”
Japan had been an exciting area of growth, she said. Last year the country imported 400,000 pounds of U.S. blueberries and that was expected to increase until Japan signed off on CPTPP without the U.S. Chile, Australia, Canada and New Zealand all started selling a lot more blueberries to the Japanese under lower tariffs.
Elizabeth Carranza, California Blueberry Commission
As it stands now, there is a 6% tariff on fresh and frozen blueberries and a 9.6% tariff on blueberries that contain added sugar. All of those are expected to fall to zero on April 1 next year.
Another U.S. specialty crop expected to see its Japanese tariff drop to zero is the walnut. Unlike the other crops, though, U.S. farmers have seen walnut exports to Japan only climb higher.
The Japanese tariff of 10% hasn’t slowed down U.S. exports to its fourth largest foreign market, according to the California Walnut Commission, which says Japan now buys about $90 million worth of the tree nuts.
U.S. walnut exports to Japan have skyrocketed by 44% over the past five years and sales are expected to rise even quicker without the tariff that drops to zero next year.
“Over the past three decades, the industry has invested over $58 million with the assistance of the USDA Market Access Program to develop the Japanese market and we eagerly anticipate the new opportunities for growth the agreement provides,” says Jack Mariani, a vice chairman for the Commission.
One commodity listed for tariff decrease by the U.S. Trade Representative in a summary of the Japan pact is cherries, but that won’t do U.S. farmers much good, said B.J. Thurlby, president of the Washington State Fruit Commission.
Japan has increased cherry production so much in recent years that its demand for imports has shriveled to negligible levels, Thurlby told Agri-Pulse.
“I don’t see any change, even with the tariff dropping,” he said. “We walked away from the Japan market. For us it’s not a big deal one way or the other.”
Where U.S. cherry farmers would really like to see tariffs drop is Vietnam, Thurlby said. The country — a member of the TPP that offered to cut its tariffs on U.S. cherries, but didn’t because the U.S. pulled out — has a big potential for growth, but its 10% tariff on U.S. cherries is a roadblock.
“There was real support for (TPP) in this industry,” he said. “For our growers it would have been a rare win.”
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