Japanese Market Sways Beef Organisation to Back Trans-Pacific Partnership

US - Not approving the Trans-Pacific Partnership (TPP) is costing the US cattle industry thousands of dollars every day in lost sales in Japan, according to some industry groups. Rachel Lane reports.
calendar icon 25 October 2016
clock icon 4 minute read

The TPP is a massive trade deal involving twelve countries around the Pacific rim, but the deal has come under fire recently in the US, notably from the presidential candidates. The pact still needs to be approved by US lawmakers.

What happens next to the TPP?

Dave Warner, communications director of the National Pork Producers Council, said TPP needs to be passed to the benefit of all of agriculture and it needs to be passed before the new president and US congress take office in January.

Both major party presidential candidates have come out against the TPP. Mr Warner said he worries what will happen if the agreement is not approved before the new administration is in office.

If the new president decides not to sign TPP, it could be another four or eight years before the agreement would be considered again. By then, a new trade agreement would need to be developed, Mr Warner said.

Negotiations of the current agreement took years to develop. Negotiations ended last October. Warner said only Malaysia has approved the agreement, he thinks because the other countries are waiting for the United States to approve it.

The Obama administration has said it will send the TPP agreement to congress after the election. Congress will be back in session mid-November. Once congress approves the agreement, President Barack Obama can sign it.

“This would be a huge benefit for US pork producers. Actually, it would be a huge benefit to all of US agriculture and all of the US economy,” Mr Warner said. “We have no free trade agreement now with Japan so our product goes in with a fairly high tariff.”

Government promotes deal as good news for farming

The Obama Administration is keen to show off the benefits of the deal, going against the recent anti-free-trade mood in the country. Tom Vilsack, the secretary of the United States Department of Agriculture, USDA, said 30 per cent of American agricultural gross income and 20 percent of farm income is related directly to exports.

“If you don’t have trade, if you don’t have exports, you’re going to have a very difficult time in farm country,” he said.

He said if the US doesn’t make trade agreements, it will not stop the rest of the world from making agreements with other countries. China is already working on an Asian-only trade agreement.
“What we want is the rest of the world to open their markets. That’s pretty tough to do without trade agreements,” Mr Vilsack said.

Agriculture receives enough direct benefit from trade that Mr Vilsack thinks farmers are generally supportive of trade agreements and know how important trade agreements are, even if the farmers don’t agree with all the details.

The importance of Japan

A study by the US International Trade Commission said that Japan is an important market for US exports, because it generally offers high prices to producers and demands agricultural products that the US can competitively supply.

In 2015, Australia and Japan finalised a trade agreement separate from the TPP. As a result, Australian commodities have lower tariffs entering Japan than US commodities. While Japan remained the number one destination for US beef imports in 2015, sales are down, said Chase Adams of the National Cattlemen Beef Association. The US industry has seen a 10 per cent loss in sales so far this year.

The lower tariff Australia is currently paying to Japan will continue to decrease in a step-down manner over the coming years. The imports will decrease in cost every year until it reaches the agreed upon level.

Until the US signs the TPP, their tariff with Japan will remain the same, meaning the prices of beef and other commodities from America will remain less competitive than those from Australia until the deal is signed, Mr Adams said.

“That 10 per cent tariff advantage that they have right now is huge,” Mr Adams said. 

Japan is the pork industry's greatest importer. With TPP in place, Warner said the $2 million dollar industry could increase dramatically for US pork producers.

“In all sectors of the US economy, we’re going to see increases in exports to those TPP countries,” Warner said.

Mr Adams said the beef industry will benefit in part because the Asian markets have demand for parts of the cattle that are less in demand in the US. With a larger demand for tongue, hides and other parts of the cattle not often used in the US, each cow could be worth an additional $300.

Some industries, pharmaceuticals and tobacco for example, have expressed concerns, Mr Adams said, but TPP would benefit agriculture, for everyone from livestock to grains.

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