Packages of Dean Foods butter brand Land O'Lakes are displayed in a supermarket in New York. Photo: REUTERS file
politics

Where U.S.-Japan trade deal falls short of TPP pact

34 Comments
By David Lawder

U.S. President Donald Trump has called his new trade deal with Japan a "phenomenal" victory for U.S. farmers.

But don't expect America's Land O'Lakes butter to knock New Zealand's Anchor or France's President brands off store shelves in Japan, the world's third largest economy.

Butter is one of several U.S. dairy products that will not get improved access to Japan's 127 million consumers under the limited bilateral trade deal agreed to by Trump and Japanese Prime Minister Shinzo Abe on Sept 25.

The deal's full text has not been released and remains classified, but congressional aides, trade experts and industry groups briefed on it say that it offers worse access to Japan for some U.S. agricultural goods than the Trans-Pacific Partnership (TPP), a now 11-country trade deal that Trump quit on his third day in office in 2017.

U.S. butter, milk powder and evaporated milk, along with some grains, would have competed with other TPP signatories for Japan's new import quotas under the Pacific Rim deal.

When the United States pulled out, that left more space for brands like Anchor or Australia's Western Star, and Japan refused to grant new quotas for U.S.-made products in the just-completed U.S. negotiations.

But there are gains that bring U.S. beef, pork and wine exports in line with TPP competitors from Australia, New Zealand and Canada, putting them on the same tariff schedule.

"There are some specific parts of the ag sector that really do benefit from this," said Matthew Goodman, a Asian economics expert at the Center for Strategic and International Studies in Washington. "More broadly, this is not a highly significant deal from a commercial perspective, as it doesn't touch the biggest item in bilateral trade, autos and auto parts."

WHAT'S LEFT OUT

The U.S.-Japan agriculture-centered deal is notable for what it leaves out. It does not include the bulk of products that make up the bilateral trading relationship, notably autos from Japan and aircraft, liquefied propane gas and semiconductor manufacturing equipment from the United States.

See graphic on top U.S. exports to Japan.

Motor vehicles and parts, by far the largest Japanese export to the United States at $56 billion in 2018, were left out for a later phase of negotiations. Abe said Trump agreed not to impose threatened "Section 232" tariffs on Japanese cars and parts on national security grounds.

Japan has no tariffs on cars and trucks from the United States, but U.S. automakers argue that most American cars are kept out by environmental and safety regulations, and Japan's currency policies that keep the yen low against the dollar.

TPP would have eased Japan's regulatory barriers, but neither agreement contained any rules to combat currency manipulation - a stated goal of the U.S. Trade Representative's office.

America's rice growers won't benefit from the new bilateral trade deal, as tariffs and quotas on U.S. rice imported to Japan set in the early 1990s remain in place.

Under the TPP, Japan would have accepted 70,000 metric tons of American rice per year tariff-free under a U.S.-specific quota, but this was not included in the bilateral deal.

Tim Johnson, president and CEO of the California Rice Commission, said he hoped for a better deal in later phases of U.S.-Japan talks.

Barley also will not get improved access in the trade deal, congressional aides said, as Japan did not expand its TPP-wide quota for the grain used widely in beer production.

Apart from the lack of improved access for butter and milk powder, exact details of cheese provisions in the U.S.-Japan deal are not yet known. TPP would have eliminated Japan's tariffs of up to 40 percent on U.S. cheese over 16 years, but dairy industry officials say they eventually expect to be on a par with TPP countries.

"We think it's probably 80% of what we would have gotten in TPP," said Michael Dykes, president and CEO of the International Dairy Foods Association.

Documents provided by the Japan's foreign ministry show that Japan did not grant any concessions for U.S. exports of sugar, chocolate or other confections. Tokyo's TPP-wide quotas for these products have gone to other countries.

SIMILAR TO TPP

U.S. beef is the major winner in the U.S.-Japan deal and will see Japanese tariffs fall from to 9% from 38.5% by 2033, on the same schedule as TPP competitors Australia, New Zealand and Canada, according to U.S. and Japanese officials.

The story is the same for U.S. pork exports to Japan, which topped $1.6 billion in 2018, but now face a significant tariff disadvantage compared to TPP and EU countries. The deal will put U.S. producers on the same tariff reduction schedule as these competitors, with a 20% tariff for seasoned pork dropping to zero within six years.

These concessions may provide some relief for farmers and ranchers in the politically important U.S. Midwest who have been battered by the U.S.-China trade war and have lost market share in Japan to EU and TPP competitors that have lower Japanese tariffs.

U.S. ethanol will essentially see the same tariff reduction schedule as other TPP countries, an industry official said.

And the deal maintains Japan's zero duty on U.S. corn for animal feed, but grants a quota eliminating a 3% duty on sweet corn and other types of corn, according to the U.S. Grains Council, an industry group, which said the deal brings most U.S. grains exports "largely back in line with TPP."

Wheat producers also said they have been told by the Trump administration that tariffs on exports to Japan will drop in line with tariffs on Australian and Canadian wheat.

Japan's tariffs on U.S. wine will also will fall, from 15% to 7.1% on April 1, 2020, basically the same level they would have under the TPP, the Wine Institute said.

But Japanese documents say that no concessions were granted for other types of alcohol. U.S. bourbon and Tennessee whiskey had won some labeling protections in TPP along with tariff reductions.

The main improvement over TPP comes from the U.S.-Japan digital trade agreement, say congressional aides and tech industry officials briefed on it. They described it as "TPP-Plus" and in line with USTR goals on setting global rules for digital commerce and cross-border data flows.

It includes stronger rules to prohibit cross-border taxation of digital downloads and data localization requirements than TPP. Cloud computing and new financial technologies were still new and being developed during the many years TPP was negotiated, so that deal included carve outs that would have allowed some countries to require local housing of financial sector data.

The U.S.-Japan deal prohibits these, as well as unreasonable security requests for source code.

Overall, the digital deal is in line with the new U.S.-Mexico-Canada agreement, regarded as an upgrade from TPP on digital economy issues. Abe said it reflects Japan's status as an ally of the United States in trying to set high-standard, open internet rules for the world.

© Thomson Reuters 2019.

©2019 GPlusMedia Inc.

34 Comments
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Donny's definition of a phenomenal victory is getting less than he would have otherwise. Talk about gaslighting.

9 ( +12 / -3 )

Japan has no tariffs on cars and trucks from the United States, but U.S. automakers argue that most American cars are kept out by environmental and safety regulations, and Japan's currency policies that keep the yen low against the dollar.

If this is truly the case then I am ALL for US automakers NOT having their products here!

There is no reason why these standards should be lowered to appease some trade agreement!

5 ( +9 / -4 )

And what exactly did Japan get in this deal?

8 ( +8 / -0 )

In other words. Trump pulled out of the TPP because Obama's name was on it and essentially placed us in a much worst deal. Even for the areas that now see the levels equalized with that of the TPP ultimately lost out because they potentially would have made more during the 3 years Trump has been in office. This entire charade has been a huge waste of time and only succeeded in burning a hole in people's pocket.

9 ( +11 / -2 )

And what exactly did Japan get in this deal?

Japan had their auto sector untouched since Donny had a gun pointed at Abe's head over this. This whole "agreement" was about concessions to our "friendly ally".

5 ( +5 / -0 )

Everything Trump does is "phenomenal", or the best ever, biggest, done by no other president.  Thing is, despite his "unmatched wisdom" nothing ever seems to come out of his phenomenal deals.

6 ( +8 / -2 )

Is this the art of the deal?

4 ( +6 / -2 )

And what exactly did Japan get in this deal?

Corn, lot's and lots of corn. In all seriousness, mostly beef, pork and wine. The really useful items like butter and rice are left out of course, otherwise the Japanese farmers will suffer. But don't complain if there is a butter shortage in December. sigh

7 ( +7 / -0 )

Hey but the first paragraph of the other article about this same topic complains this deal would only win back benefits lost from TPP so that’s bad. Now this one says no it won’t. Liberals need to get the narrative straight.

...Monday, a deal that would win back benefits American farmers lost...

-6 ( +0 / -6 )

I prefer Japanese butter and rice over US ones. So it’s fine.

-2 ( +5 / -7 )

U.S. automakers argue that most American cars are kept out by environmental and safety regulations

This means: "Get your American cars! They will polute your environment and are not safe to drive, but they are really really cheap!"

There are European cars all over Japan (more than 350,000 sold yearly now). Why can't the US automakers compete? Ford pulled out of Japan last year.

6 ( +8 / -2 )

A blow for consumers here as butter in Japan is three to four times as expensive as the US.

6 ( +7 / -1 )

Hey but the first paragraph of the other article about this same topic complains this deal would onlywin back benefits lost from TPP so that’s bad. Now this one says no it won’t. Liberals need to get the narrative straight.

No it doesn't. It ONLY mentions it would win back benefits lost from the TPP when Trump pulled out. It doesn't say ONLY win back benefits lost. Two completely different statements with two completely different meanings. This article talks about the things from the TPP that are not being reinstated but doesn't say that nothing is. Conservatives need to learn how to read.

6 ( +6 / -0 )

Good job. But US may get better things later in further bilateral talks, while TPP may get bogged down.

-2 ( +0 / -2 )

The last part of the article was the most significant part.

0 ( +0 / -0 )

Before everyone gets their bloomers in a twist, this is the FIRST part of the trade pact. More to follow.

-1 ( +2 / -3 )

The box of Land-O-Lakes butter in that photo sells for $4.50 here in Minnesota where its made. As I understand it, butter along with other dairy is subsidized in the US and that is the reason the price seems low. Not sure what is takes in fossil fuels to ship butter around the world, but it would seem butter is better sourced locally.

7 ( +7 / -0 )

We don't pay $4.50 for a packet of Hokkaido butter.

0 ( +4 / -4 )

In other words. Trump pulled out of the TPP because Obama's name was on it

Uh, no, heck, it was so bad even Hillary Clinton did a 180 and came out against it.

-10 ( +0 / -10 )

Can't wait for all that high fructose corn syrup to come in and ruin all of the foods here like it did in the US. If you look at labels you'll notice that it's starting to show up more and more here, yet the media doesn't mention it at all.

1 ( +2 / -1 )

Good butter here in my country is about 2.50€ for 250grams.

I never found butter in Japan to be expensive, because that is not a product you eat like rice or bread.

What is expensive is milk, more ecpensive thzn coca-cola !

All fruits too. Meat choice is limited.

A Japanese diet remains a very good for health with less sugar and fat on average. So TPP is more about consumer's choice than health.

0 ( +1 / -1 )

@jjplane, what hole, there was nothing left to burn a hole into after Obama and his "change". I seriously doubt the price of beef will make a difference no matter where it comes from as the 10% is now in place anyway. Either way with or without the agreement the People got screwed again.

1 ( +1 / -0 )

At about ¥350 for 200 grams here in Japan, 450 grams of butter (as pictured) would cost 2.25 x ¥350 = ¥788 or about $7.33.

3 ( +3 / -0 )

Concerning beef:

" ..... by 2033 ....."

Now that's quite some time until then.

Who knows what will happen during those roughly 14 years.

3 ( +3 / -0 )

At about ¥350 for 200 grams here in Japan, 450 grams of butter (as pictured) would cost 2.25 x ¥350 = ¥788 or about $7.33.

Thats likely what it would cost for butter in Minnesota if the dairy subsidies were removed. Since 1995 the US government (US Taxpayers) have provided the dairy industry over six billion dollars.

One of the reasons why Coke-Cola is so cheap, and the American diet is arguably bad. $114 billion in total corn subsidies since 1995 makes some pretty cheap high fructose corn syrup.

Nearly $17 billion in rice subsidies in that same time period.

The tax payer is on on the hook to artificially lower the price of a product to save an industry from cheaper foreign products, then that industry complains again when it can't sell their artificially price reduced product overseas without tariffs. Seems crazy messed up to me.

Its easy to just look at the trade deficit between two countries. Or just look at the direct consumer price of a product. But there is so much more to it.

My vote is to buy local products where the same or similar exists locally.

2 ( +4 / -2 )

"U.S. President Donald Trump has called his new trade deal with Japan a "phenomenal" victory for U.S. farmers." Same thing he said about tariffs on Chinese-made goods before retail prices in the US spiked 25% as a result. So much winning...

2 ( +2 / -0 )

Uh, no, heck, it was so bad even Hillary Clinton did a 180 and came out against it.

well it doesnt now , it would see the TPP members are getting a better deal, so Trump pulled out of the TPP, made another deal with Japan and doesn't get the same concessions of the TPP members, it would seem that both Trump and Hillary were wrong, not that Hillary's opinion even matters now. Master negotiator just got negotiated, no wonder the Japanese were smirking at the signing. LOL

2 ( +2 / -0 )

Good job. But US may get better things later in further bilateral talks, while TPP may get bogged down.

unlikely if anything the TPP will probably even include more countries making it even more powerful in terms of trade agreement with other countries. I have to hand it to Abe he did a good job getting the TPP finalized before the FTA with America, seems like Trump made big concessions to get a deal any deal done with Japan and make it look like a win

1 ( +1 / -0 )

Before everyone gets their bloomers in a twist, this is the FIRST part of the trade pact. More to follow.

only the Auto and auto parts sector, so any concessions in that will benefit Japan the most. The agriculture section is done which benefits the US more and it seems its not as good as the TPP. People seem to think Japan will give the US preferential treatment over the TPP, whatever Japan gives the US the TPP member will demand the same afterall it was Japan that pushed hard for it to be completed quickly they certainly dont want it to fail as itll evaporate their trade negotiating power . The TPP group has certainly favoured Japan in negotiating with the US. and just to think just a few years ago people said the TPP was dead. LMFAO

1 ( +1 / -0 )

But don't expect America's Land O'Lakes butter to knock New Zealand's Anchor or France's President brands off store shelves in Japan, the world's third largest economy.

Which store shelves is the writer talking about, never new zealand or French butter here in Japan for the general consumer.

It is imported but not avaikabke to the general public.

1 ( +1 / -0 )

I prefer Japanese butter and rice over US ones. 

Rice is unbeatable.

Butter is just plain bland, can't make the difference in taste between japanese butter and margarine.

1 ( +1 / -0 )

Which store shelves is the writer talking about, never new zealand or French butter here in Japan for the general consumer.

It is imported but not avaikabke to the general public.

Our local SEIYU has New Zealand butter.

0 ( +0 / -0 )

Just FYI, NZ butter at SEIYU

https://sm.rakuten.co.jp/item/9421016151042

0 ( +0 / -0 )

I love that Land-O-Lakes has not changed their package art in decades. That native woman has really nice knees! LOL

0 ( +0 / -0 )

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