Red Meat Competitors Stand to Gain Major Advantage in Japan

With the European Union and Japan recently signing a comprehensive economic partnership agreement (EPA) and the 11-member Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) moving toward implementation, the U.S. Meat Export Federation (USMEF) has prepared an initial assessment of the potential U.S. pork and beef industry losses that could result from Japan’s participation in these agreements.

USMEF Economist Erin Borror explains that the EU is already Japan's largest supplier of frozen pork cuts, and has recently made gains in the ground seasoned pork category. Canada, which is a CPTPP participant, is the United States' largest competitor in Japan's chilled pork market.

On the beef side, Australia already has a significant tariff rate advantage in Japan through a bilateral trade agreement, but this gap will widen further under CPTPP. Beef from Canada, New Zealand and Mexico will also enjoy more favorable market access in Japan once CPTPP is implemented.

USMEF anticipates that both the Japan-EU EPA and CPTPP could enter into force by April 2019, at which point all major non-U.S. suppliers of pork and beef to Japan will have preferential duty access. Japan, Mexico and Singapore have already ratified CPTPP, and once the agreement has been ratified by six participating countries, it will enter into force after 60 days. While no specific timeline has been established for ratification of the Japan-EU EPA, there is a good chance it could enter into force prior to the next Japanese fiscal year, which begins April 1, 2019.

TRANSCRIPT:

Joe Schuele: Japan and the European Union have signed an economic partnership agreement that will give European pork a big leg-up in the Japanese market. U.S. Meat Export Federation Economist Erin Borror has more details in this USMEF report:

Erin Borror: Japan and Europe really stepped up the initiative to get their agreement in place. They signed the agreement July 17, and both are working aggressively to implement quickly. We assume certainly being implemented in early 2019. Europe has historically been our largest competitor in the Japanese pork market. This year they have accounted for 64 percent of Japan's frozen pork imports, so things like loins and bellies are very competitive but the other dynamic that has unfolded is the entrance into the ground seasoned pork market, valued-added raw material for Japan's sausage manufacturers.

Joe Schuele: The other agreement that will give competitors a big edge in Japan for both pork and beef is the Comprehensive and Progressive Transpacific Partnership or TPP-11.

Erin Borror: The agreement that was etched on beef and pork back in the TPP days is the same, so the big threat to the U.S. is that not only Europe but all of our competitors that ship pork as well as beef into Japan will benefit from reduction in tariffs. For the very lucrative chilled pork market, where the U.S. has historically really been a dominant supplier, we are up against Canada. Canada has already been gaining market share. We expect that to continue and possibly even at a faster pace once CPTPP is implemented. From the beef side, Japan does have the highest tariffs of any major markets for U.S. beef and that's at 38 and a half percent. Now in the CPTPP that dropped immediately to 27 and a half percent and that's roughly what Australia is already enjoying through their bilateral agreement and then the tariff will phase all the way down to 9 percent over 15 years.

Joe Schuele: For more information, please visit USMEF.org. For the U.S. Meat Export Federation, I’m Joe Schuele.

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The U.S. Meat Export Federation (www.USMEF.org) is the trade association responsible for developing international markets for the U.S. red meat industry. It is funded by USDA; the beef, pork, lamb, corn and soybean checkoff programs, as well as its members representing nine industry sectors: beef/veal producing & feeding, pork producing & feeding, lamb producing & feeding, packing & processing, purveying & trading, oilseeds producing, feedgrains producing, farm organizations and supply & service organizations.