US beef industry desperately needs an FTA with Japan
The market share of 25% owned by the US beef industry in the Japanese market could soon decrease as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) signed in March by the Asian country with other partners in the Pacific area will take effect.
Countries such as Australia, New Zealand, Mexico and Canada, will benefit from an immediate reduction and phase-down of tariffs from their current levels over a 15-year period.
In 2017, the US officially withdraw from the trade agreement but now that doesn't look like the best idea.
Under the CPTPP, Japan agreed to significant tariff reductions on beef, with reductions from 38.5% to 9% for muscle cuts. Tariff reductions for select offal products will be phased out completely. Meanwhile, US beef will continue to face tariffs of 38.5% to 50%, as well as a global safeguard tariff of 50% when imports exceed a specified level.
University of Tennessee Institute of Agriculture (UTIA) projection range suggests that Australian beef could increase by as much as $139 million, while US beef could decrease by as much as $143 million. Although Canada, Mexico and New Zealand also face lower tariffs, the projected increase for these countries is small at $4 million. Australia also gains in the frozen beef market at $162 million, reports Drovers magazine.
"As exporting countries, other than the U.S., aggressively pursue free trade agreements or FTAs, US agricultural sectors such as beef could be disadvantaged, if we stay out of the FTA game. It is important for the US to stay engaged in international trade negotiations in order to maintain its competitive edge in global markets" considers UTIA trade expert Andrew Muhammad.
Without a Free Trade Agreement signed with Japan, higher tariffs will likely cause a decline in US beef exports to Japan that could negatively impact returns to every segment of the industry, from the cow-calf producers to the packer, mentions the report released by University of Tennessee Institute of Agriculture.
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