The United States and Japan signed the US-Japan Trade Agreement on October 7, 2019. One of the Trump Administration’s most important goals was to get an early deal with Japan that would enable American farmers, ranchers, and agribusinesses to remain competitive in the face of other countries having preferential tariffs in the Japanese market. This agreement opens markets and will support expansion of US food and agricultural exports, increase farm income, generate more rural economic activity, and promote job growth.
Nationwide, US food and agricultural exports totaled nearly $145 billion in 2018, supporting more than one million American jobs. Global demand for these products is growing but so is competition among suppliers. When implemented by Japan, American farmers, ranchers, and agribusinesses will be able to compete on an even playing field with CP-TPP countries for many of the products that the United States exports into the Japan market.
Japan’s $5.0 trillion economy is the third largest in the world, and a trade agreement between the United States and Japan is of particular importance, since Japan is already the United States’ fourth‐largest agricultural export market.
In the US-Japan Trade Agreement, Japan has committed to provide substantial market access for the United States by either phasing out most tariffs (many immediately), enacting meaningful tariff reductions, or allowing a specific quantity of imports at a lower duty (generally zero) where tariff elimination is not possible. Importantly, the tariff treatment for the products covered in this agreement with the United States will match the tariffs that Japan provides preferentially to countries in the CP-TPP agreement.
Key points of the agreement
The benefits of this agreement will occur through a combination of tariff elimination, tariff reductions, and new country-specific tariff‐rate quotas (CSQs). These benefits will accrue to US farmers and ranchers once the agreement has been implemented.
Out of the $14.1 billion in US food and agricultural products imported by Japan in 2018, $5.2 billion was already duty free. Under this initial tariff agreement, Japan will eliminate or reduce tariffs on an additional $7.2 billion of US food and agricultural products. Over 90 percent of US food and agricultural imports into Japan will either be duty free or receive preferential tariff access once the Agreement is implemented.
Tariff Elimination: Once the agreement is implemented, Japan will provide immediate tariff elimination for US food and agricultural products valued at approximately $1.3 billion, including almonds, blueberries, cranberries, walnuts, sweet corn, lactose, milk albumen, grain sorghum, food supplements, broccoli, and prunes. Another $3.0 billion of US exports will benefit from staged tariff elimination matching access conditions in the CP-TPP agreement. This group includes processed pork, beef offal, frozen poultry, wine, frozen potatoes, oranges, fresh cherries, cheese and whey, ethanol, egg products, and tomato paste.
Tariff Reduction: For products valued at $2.9 billion of current trade, Japan will reduce tariffs in stages, matching the preferential access of CP-TPP countries. Among products benefiting from this enhanced access will be fresh and frozen beef and pork worth over $2 billion in 2018 that matches the preferential access of CP-TPP countries.
CSQs: For some products, preferential market access will be provided through the creation of CSQs, which provide access for a specified quantity of imports from the United States at a preferential tariff rate, generally zero. Japan will provide access through CSQs for products such as wheat and wheat products, malt, glucose, fructose, corn and potato starch, and inulin.
Mark up: Importantly, for all wheat and barley imports, Japan will provide the same reduction to its wheat and barley “mark up” as provided to CP-TPP suppliers. Japan’s imports of US wheat and barley were valued at more than $800 million in 2018.
Safeguards: This agreement provides for the limited use of safeguards. Japan will have safeguards for beef, pork, whey, oranges, and race horses.
Horti products
Fresh Fruits: Japanese imports of US fresh fruits covered under agreement were $224 million. Japan will eliminate duties on many US fruits, including fresh cherries, blueberries, raspberries, blackberries, oranges, kiwi, cranberries, peaches, nectarines, apples, and figs. Japan’s tariff on raspberries, blackberries, kiwi, cranberries, peaches, and nectarines will be immediately eliminated. Japan’s 8.5 percent tariff for fresh cherry imports will be eliminated in five years, while Japan’s 17 percent tariff on fresh applies will be eliminated in 10 years.
Japan will eliminate tariffs of up to 32 percent on US oranges imported during the period of April through November in 5 years, while the tariff on US oranges imported December through March will be eliminated in 7 years. Japanese orange imports from the United States in 2018 totaled $71 million. Japan’s tariff on lemons is already fixed at zero.
Japan may employ a safeguard mechanism on US oranges, similar to CP-TPP, for the months of December through March that is not expected to impact trade. The safeguard trigger volume in year one will be 35,150 metric tons, which will grow to 44,650 metric tons by 2024. The safeguard will end on April 1, 2025. Japan has also agreed to renegotiate the safeguard trigger volume if the safeguard is implemented in two years of any consecutive three-year period. During the most recent December through March period, the volume of Japan’s imports of US oranges was about 20,000 metric tons.
Potatoes and Potato Products: Japan imported more than $400 million of US potato and potato products in 2018. In this agreement, Japan will eliminate tariffs on most potato products, including immediate elimination of the 4.3 percent tariff on fresh potatoes, and elimination of the 8.5 percent tariff on frozen French fries over three years. Japan will also phase out the current 20 percent on dehydrated potatoes in five years.
Vegetables: Japan will eliminate tariffs on $147 million of current imports of vegetables from the United States. In this agreement, Japan will immediately eliminate its 10.6 percent tariff on frozen sweet corn and its 3 percent tariff on broccoli, celery, and cabbage. Additionally, Japan’s current 10 percent tariff on azuki, kidney, white pea, and other beans within its WTO dried leguminous vegetables TRQ will be eliminated immediately.
