How Four Trade Agreements Are Reshaping Japan's Market for U.S. Pork and Beef

Japanese consumers are eating more pork and, to a lesser degree, more beef. From 1990 to 2020, annual beef consumption rose 27.4 percent, from 6.0 to 7.6 kilograms (13.2 to 16.8 pounds) per person, and pork rose 24.3 percent, from 13.0 to 16.1 kilograms (28.6 to 35.5 pounds). Among animal proteins, pork is now Japan's second-largest source of calories, behind only fish and shellfish, according to Japanese government data.

Where Japanese adults got their animal protein in 2019. Chart from the USDA Economic Research Service.

Who supplies Japan

Tariffs shield Japan's pork and beef farmers from imports, so much of what the country eats is produced at home despite the high cost. In 2021 Japan produced more than 37 percent of the beef it consumed and about 50 percent of its pork, and imported the rest.

• Pork: in this century the United States has held an average of about 38 percent of Japan's import market, and Canada nearly 20 percent.
• Beef: Australia supplied 41 percent of Japan's imports in 2021 and the United States 40 percent; over the last 30 years the two have averaged more than 90 percent between them.

Four agreements

From December 2018 to January 2021 Japan brought four trade agreements into force, and now essentially all its beef and pork imports come from partner countries:

• the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which began as the 12-country Trans-Pacific Partnership, about 40 percent of the world economy, and was renamed after the United States withdrew in January 2017. By September 2022 it was fully in force for Australia, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam;
• the Japan–EU Economic Partnership Agreement, with the 27 EU countries, in force from February 2019;
• the U.S.–Japan Trade Agreement, in force from January 2020;
• the Japan–UK Comprehensive Economic Partnership Agreement, in force from January 2021.

They cut tariffs below the rates Japan charges under World Trade Organization (WTO) rules, in yearly steps through Japan's fiscal year 2033 (April to March). The WTO rate on beef is 38.5 percent; partners paid 23.3 percent in fiscal 2023, falling to 9.0 percent by 2033. Pork, charged 8.5 percent processed and 4.3 percent unprocessed under WTO rules, goes duty-free from partners from fiscal 2028.

Japan’s WTO tariffs and its trade-agreement tariffs on beef and pork. Chart from the USDA Economic Research Service.

The gate price on pork

Pork still meets a gate price, a kind of minimum price. If imported pork comes in below it, an extra tariff makes up the difference. For pork carcasses, with a 4.3 percent tariff and a gate price of $1.62 a pound:

• at $2.00, above the gate price, only the 4.3 percent tariff applies;
• at $1.62, exactly the gate price, the same;
• at $1.24, the importer pays a $0.38 gate-price tariff, plus 4.3 percent on $1.62;
• at $0.05, the $1.57 difference is capped at $1.49 a pound, plus the 4.3 percent.

The gate price system in four cases. Chart from the USDA Economic Research Service.

Safeguards on beef

For beef, the deals put Japan's main suppliers on a fairly even footing, but their safeguards differ. A safeguard raises the tariff for at least 30 days once imports pass a trigger volume. The U.S. trigger is much lower than the CPTPP's, although both supply about the same amount, and the United States set it off in March 2021. The CPTPP trigger, set when the United States was still part of the deal, was never adjusted: in fiscal 2020 CPTPP beef reached less than 54 percent of it, leaving room to grow, a challenge for U.S. exporters and Japanese farmers alike.

In March 2022 the U.S. safeguard was renegotiated into a triple trigger: the tariff rises only if U.S. imports exceed the agreement's trigger for the year, exceed the previous year's, and, combined with CPTPP imports, exceed the CPTPP trigger. The chance of U.S. beef tripping it each year remains high.

Safeguard trigger volumes and tariffs for the United States and CPTPP countries. Chart from the USDA Economic Research Service.

The model's answer

Economists at USDA's Economic Research Service used the Global Trade Analysis Project (GTAP) model to compare 2018, the last year before the agreements, with fiscal 2033, when the tariff cuts will be complete. Japan's beef production falls an estimated 17.2 percent and its unprocessed and processed pork production 12.5 and 13.2 percent. Imports rise 26.6 percent for beef, 10.8 percent for unprocessed pork and 12.8 percent for processed pork.

Estimated change in Japan’s production and imports, 2018 to fiscal 2033. Chart from the USDA Economic Research Service.

In money terms the United States gains most. U.S. exports to Japan grow by an estimated $143.0 million for unprocessed pork, $93.1 million for processed pork and $380.8 million for beef. The beef figure would have been $33.1 million higher had the model not allowed for the safeguard, which in effect caps U.S. beef. Even so, the United States looks likely to keep or grow its share of both markets.

Estimated growth in U.S. exports to Japan by fiscal 2033. Chart from the USDA Economic Research Service.

Sources

• USDA Economic Research Service, "Trade Agreements Change Japan's Markets for U.S. Pork and Beef," Amber Waves, drawn from E.C. Davis, E. Sabala, D. Russell and J. Beckman, The Impact of Recent Trade Agreements on Japan's Pork Market (ERR-317), and E. Sabala and E.C. Davis, The Impact of Japan's Trade Agreements and Safeguard Renegotiation on U.S. Access to Japan's Beef Market (ERR-318); rewritten in hubnx's own words. Charts from the USDA Economic Research Service.