On May 19, the U.S. International Trade Commission (ITC) released its report assessing the likely impact of the Trans-Pacific Partnership (TPP). The report offers a positive outlook for U.S. agriculture, projecting that it will see the greatest percentage gain (relative to baseline projections) of any sector of the U.S. economy.
Under TPP, the ITC’s model estimates that by 2032, U.S. agricultural exports would be $7.2 billion higher than the baseline (no TPP), largely driven by growth to Japan and Vietnam. By individual sector, the largest increases would be beef exports to Japan ($840 million), dairy exports to Canada ($1.2 billion) and Japan ($534 million), processed foods (excluding meat) to Japan ($1.2 billion), and fresh fruits, vegetables, and nuts to Vietnam ($721 million).
Beef highlights from the report:
ITC estimates indicate that by 2032, total U.S. beef exports will increase by an additional $876 million (8.4 percent) if TPP is implemented in 2017 compared to the baseline. The $876 million estimate results from U.S. beef exports to TPP partner countries increasing by about $1 billion (mostly to Japan), while exports to the rest of the world decline slightly.
For Japan, the market access gains under the TPP would not only lower tariffs on U.S. beef exports to Japan, but, importantly, would eliminate preferential tariff treatment for Australia’s beef exports to Japan. As a result, U.S. beef exports to Japan would be $840 million, or 50 percent, higher than the volume without TPP, displacing some imports of beef from Australia. Japan’s domestic beef production would also likely decline moderately.
The Commission’s model results indicate that U.S. beef imports would increase by about $438 million (6.4 percent) over the baseline, with most of the additional imports coming from New Zealand. U.S. production would expand by about 0.5 percent in volume under the TPP. Production of both live animals and beef would increase. As a result, employment would rise by about 0.4 percent in both the beef sector and the live animal sector.
Pork highlights from the report:
ITC estimates that U.S. pork exports would increase by an additional $219 million (or 1.9 percent), with most of the increase in exports also going to Japan. U.S. pork exports to all TPP partner countries would increase by $387 million, but these gains would be partially offset by lower exports to China, South Korea and the rest of the world.
Japan’s increased pork imports from the United States ($210 million, up 8 percent from the baseline) would largely displace imports from the European Union, plus some Japanese domestic production (note that the ITC report does not assume a Japan-EU economic partnership agreement; thus the assumed drop in U.S. exports to the rest of the world as EU pork shifts away from Japan and into other markets). Overall annual U.S. pork production would be expected to grow by about $180 million, or 0.3 percent, relative to the baseline. The production increase would be expected to lead to an increase in sector employment of about 0.3 percent.
The report also notes that tariff preferences under TPP should favor U.S. and Canadian chilled pork exports, but that Japanese retail price data indicates Japanese consumers have been willing to pay higher prices for domestic pork. Also, since the gate price remains, immediate growth is not expected, but over time, and depending on exchange rates and global pork prices, Japanese importers could shift to bringing in more cuts below the gate price, at the new lower specific duty.
Japanese consumption of pork has been gradually increasing, and over the five-year period from 2010 through 2014 Japan’s pork imports increased as a share of overall pork consumption from 44 percent to 48 percent. Pork imports have increased more rapidly than beef imports, partly due to high global beef prices. In the ITC estimates, both of these factors are expected to moderate beginning in 2015, so Japanese imports of pork may begin to slow.
A summary of the report is available in this ITC news release. The full report is also available online, with analysis of the impact of U.S. beef trade beginning on page 148 and the pork trade analysis beginning on page 157.