The Japanese tariff on U.S. beef has dropped gradually from 38.5% in 2019 to 23.3% this year as a result of the three-year-old U.S.-Japan Trade Agreement, a prime example of the kind of free trade agreement the U.S. ag sector and some lawmakers say they want to see replicated.
While U.S. Trade Representative Katherine Tai continues to reject pressure from lawmakers and the ag sector to include tariff-slashing measures in any new trade deals, she did lead the effort to bolster beef trade between the U.S. and Japan by negotiating a new Japanese safeguard mechanism to make it much harder for U.S. beef exports to be impacted by overheated trade.
“Without the U.S.-Japan Trade Agreement, U.S. red meat would face severe disadvantages relative to all of our major competitors who had already secured FTAs,” Erin Borror, vice president for economic analysis at the U.S. Meat Export Federation, tells Agri-Pulse. “In general, high tariffs are a burden on consumers and greatly restrict trade. This is especially true in emerging markets, which tend to be more price-sensitive. Tariff reductions benefit consumers and U.S. agricultural exports.”
In November, Japan’s parliament gave the final approval to a deal that Tai negotiated to amend the beef trade safeguard mechanism, reducing the probability that U.S. beef could be hit with higher Japanese tariffs.
The updated safeguard “will ensure our farmers and ranchers continue to have access to one of the world’s most dynamic markets,” Tai said. “The protocol represents a foundational pillar of our bilateral trade relationship — and I am grateful to our producers and stakeholders who helped make it possible.”
But that wasn’t nearly enough to make lawmakers stop calling for the Biden administration to negotiate new, tariff-slashing FTAs.
U.S. Trade Representative Katherine TaiNebraska Rep. Adrian Smith, chairman of the House Ways and Means Trade Subcommittee, and 19 other lawmakers wrote to Tai last month and signaled their frustration with the Biden administration's current trade approach.
“While the United States has come to a virtual standstill in competition for economic influence because of a focus on dialogues, frameworks, and limited agreements that lack meaningful enforcement mechanisms and market access commitments, China and other economic competitors have taken advantage of our absence,” they wrote.
By “market access,” the lawmakers mean tariff-cutting, which is the core of the U.S.-Japan Trade Agreement.
The Trump administration negotiated the U.S.-Japan Trade Agreement after it pulled the U.S. out of the Trans-Pacific Partnership negotiated during the Obama administration. That Pacific Rim trade deal later rekindled without the U.S. as the Comprehensive and Progressive Trans-Pacific Partnership. Japan, a key partner in the CPTPP, began dropping its tariffs on beef imports from member countries like Australia, New Zealand, Canada and Mexico — but not the U.S.
Japan, under the bilateral deal with the U.S., eliminated all tariffs for commodities like almonds, blueberries, walnuts, sweet corn, sorghum and broccoli. The country also began phasing out tariffs on pork, wine, cheese, whey, ethanol and oranges and erecting new quotas for U.S. wheat, malt, potato starch, glucose, fructose, corn starch and insulin.
But it was U.S. beef exports that likely gained the most.
The U.S. exported about $2.29 billion worth of beef and beef products — such as tongues and frozen livers — to Japan in 2022; while that’s a little less than in the prior year, it still represents a major success in the eyes of beef exporters. Supporters of the deal argue the figures would not have been possible without the FTA between the U.S. and Japan that was negotiated during the Trump administration and then tweaked under the Biden administration.
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The drop in Japan’s consumption caused by the COVID pandemic, global shipping problems and now the sharp devaluation of the Japanese yen have all pushed down on trade, says USMEF spokesman Joe Schuele. The U.S.-Japan Trade Agreement ensured that the U.S. would not fare worse than other beef exporters when it came to supplying Japan.
“The economy situation hasn’t made Japan a great growth market over the past year, but those gains in market access become even more important,” said Schuele.
It's exactly the kind of free trade agreement that ag groups like the USMEF, U.S. Dairy Export Council, American Farm Bureau Federation and others say the U.S. needs. Especially in markets like Vietnam.
The U.S. — unlike the European Union, Australia, Canada, India, Russia and Canada — does not have a tariff-slashing FTA with Vietnam.
While the bilateral deal with Japan put U.S. beef exporters on a level playing field with its biggest competitors to supply the Japanese market, other Asian trading partners like Vietnam give substantial tariff benefits to the European Union, Canada, Australia and even Russia in trade pacts.
When it comes to beef, Borror said Vietnam is a prime example of a country that would likely be importing a lot more from American producers if the U.S. did not face much stiffer tariffs than its competitors.
Last year, Vietnam imported 154,437 metric tons of beef from India, 24,964 tons from Australia, 15,776 tons from Canada and 10,751 tons of U.S. product. What do India, Australia and Canada all have in common? Vietnam’s tariff on their beef is zero due to free trade agreements with the country. For U.S. beef, it’s 14%.
“Vietnam and Japan were the two TPP markets where we stood to make some real gains,” Schuele said. “That hasn’t happened in Vietnam, where we’re at a severe tariff disadvantage.”
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