A U.S.-Japan Trade Agreement: Potential Benefits to U.S. Beef
Recent research from ARE Professor Blake Brown explains the positive effects of a trade deal on the U.S. beef industry. He also identifies the challenges posed by reaching such a trade agreement.
Summary
A trade agreement between Japan and the United States would significantly benefit U.S. beef exports to Japan if the agreement reduces the tariffs on U.S. beef imported by Japan. A reduction in the 38.5 percent ad valorem tariff imposed by Japan on U.S. beef would make it more competitive with Australian beef. Japanese imports of Australian beef enjoyed a lower tariff rate than U.S. beef due to a Japan-Australian bilateral agreement. But Australia receives an even lower rate under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The lower tariff rate of 9 percent that Australia will eventually receive under the CPTPP places U.S. beef at a competitive disadvantage and will lead to a decline in U.S. beef exports to Japan.
The lower tariff under the CPTPP could increase the value of Australian beef exports annually to Japan by $215 million and decrease the value of U.S. beef exports to Japan by $204 million if the tariff rate on U.S. beef remains at 38.5 percent. If the tariff rate on U.S. beef exports were also reduced to the CPTPP rate of 9 percent then the value of annual beef exports from Australia and the U.S. to Japan would increase by $100 million and $292 million, respectively.
U.S. exports of fresh, chilled or frozen beef to Japan have grown steadily over the past decade since a 2003 ban due to Mad Cow disease. In 2018 U.S. exports to Japan of fresh, chilled and frozen beef were over $1.7 billion at 47 percent of the value of all beef exports to Japan. From 2005 to 2017, annual growth in export value has exceeded 10 percent in every year except 2015.
However Australia is a close competitor with 45 percent of the value of all beef exports to Japan in 2018. Implementation of the CPTPP, of which Australia is a member, will gradually reduce tariffs for CPTPP members on beef to 9 percent over 15 years placing the U.S. at a significant disadvantage to Australia. The CPTPP entered into force in 2019.
