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How prices will change under the TPP: Beef

  • 2015-10-16 15:00:00
  • , Nikkei
  • Translation

(Nikkei: October 16, 2015 – p. 18)

 

 Beef prices, including those of U.S. imports, are set to drop under the Trans-Pacific Partnership (TPP) agreement. Japan imports 60% of its beef, and consumers will benefit if prices go down. Farmers, however, are concerned that domestic beef prices will be swept up with that trend and be pulled down as well.

 

 Japan now places a tariff of 38.5% on beef imports (excluding those from Australia). Under the TPP, the tariff will drop to 27.5% in the first year and to 9% in the 16th year. In 2014, Australia was top supplier to Japan’s beef market, accounting for 54% of overseas supplies, while the U.S. was next at 36%. The general manager of the beef division at Sojitz Foods Corporation predicts, “U.S. beef will regain its competitiveness [under the TPP].”

 

 According to Japan’s Agriculture & Livestock Industries Corporation, the retail price (regular price excluding bargain sales) of U.S. beef flank steak was 318 yen per 100 grams in Japan as of August 2015. That is 63 yen, or 25%, higher than the Australian import. American and Australian prices were about the same until 2013, but each country changed its export volume due to weather and other factors. Moreover, under the Japan-Australia Economic Partnership Agreement (EPA), which came into effect in January 2015, tariffs on Australian beef were cut substantially.

 

 At present, chilled Australian beef products are subject to a 31.5% tariff while frozen products are under a 28.5% tariff. Because the tariff on Australian beef will continue to decline [under the bilateral EPA], it was important for the United States to see how low it could set the beef tariff at the time the TPP first goes into effect. Under the TPP, U.S. beef prices will decrease immediately [with the tariff reduction], and both U.S. and Australian prices will decrease further [as the tariff is lowered further]. Australian beef flank steak looks like it will cost about 240 yen per 100 grams – or 7% lower than today – when the beef tariff is 9%, provided the local market does not change.

 

 There is a safeguard in place under which tariffs will rise if there is a dramatic surge in imports. For beef, there is the added condition that “the safeguard system will be eliminated if it is not triggered for a period of four years after the 16th year [of the TPP].” Toru Yamauji, chairman of the Japan Cattle Industry Cooperative, cautions, “The safeguard will be eliminated because importers are likely to take care to ensure that the safeguard is not activated.” If there is no limit on import volume, there is a chance that use of foreign beef will increase, particularly in the food service industry.

 

 The general manager of the agriculture countermeasures division at JA Miyazaki Central Committee comments, “Dairy farmers have bred cross dairy-wagyu cattle, and the beef is in the supermarket as a domestic product. Its impact will likely spread if it can compete with foreign imports in quality and price range.”

 

 

Item

TPP Agreement

Beef

Current tariff of 38.5% will be reduced to 27.5% in the first year of the TPP and then reduced to 9% in the 16th year. The safeguard will be discontinued if it is not triggered for a period of four years after the 16th year.

Beef tongue

Current tariff of 12.8% will be eliminated in the 11th year.

Offal, including skirt steak

Tariff of 12.8% will be eliminated in the 13th year.

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