US farmers being cut out of Japan after TPP withdrawal

Producers urge Trump to start trade talks as they lose Asian market share to rivals

US farm groups are ramping up pressure on Donald Trump to quickly launch trade talks with Tokyo, as they face mounting evidence of lost sales and market share in Japan following America’s withdrawal from the Trans-Pacific Partnership. In recent weeks, wheat, pork and beef producers in the US have complained that they are being rapidly outflanked and replaced in the lucrative Japanese market by rivals including Canada, Australia, and EU member states, whose trade deals with Japan entered into force in recent months.  Farm belt politicians, including from Mr Trump’s own Republican party, are increasingly restless about the latest trends in trade with Japan, which has added to the angst among farmers and ranchers about the president’s protectionist trade policies. Farmers and ranchers have already suffered heavily because of retaliatory tariffs imposed by China on their products.

“We're now behind in Japan because our other allies here have signed agreements and are moving forward and going to receive the benefits of the tariff reductions and it's going to put US producers at a significant disadvantage,” Steve Daines, a Republican senator from Montana, told Robert Lighthizer, US trade representative, at a congressional hearing last week. He pointed to the struggles of his state’s grain producers. “They've lost barley contracts with Japanese clients and they're very concerned,” he said.  Jim Monroe, a spokesman for the US Pork Producers Council, said that US pork exports to Japan, a $1.6bn business last year, had dropped 35 per cent in volume so far this year. “We’re already losing sales and seeing the negative impact . . . we’re under significant duress right now,” he said. He added that on April 1, at the beginning of the Japanese fiscal year, additional tariff cuts would take effect, further putting the US at a disadvantage.

Expeditious negotiation of a trade agreement with Japan is one of US pork’s top priorities, he added. Tobias Harris, vice-president at Teneo Intelligence, noted that Japanese imports of beef from TPP countries had surged 150 per cent year on year in January — another sign that a big shift in trading patterns was under way.  “Every week our agriculture folks are losing their competitiveness in Japan,” said Wendy Cutler, a former US trade negotiator and vice-president of the Asia Society Policy Institute. “They are seeing it now”.  The pain felt by farmers is a vivid reminder of the economic consequences of Mr Trump’s decision early in his presidency to withdraw the US from TPP — a trade pact among 11 Pacific nations including Japan — that was negotiated by Barack Obama. While many of the fears about US withdrawal focused on the geopolitical impact — signalling American disengagement from Asia to the benefit of China — the raw financial costs have not materialised until now.

The US administration has responded by vowing to accelerate plans for trade talks with Japan. Mr Trump and Shinzo Abe, the Japanese prime minister, agreed to hold negotiations last September, but these have not yet been formally launched. Mr Trump is expected to hold another meeting with Mr Abe in May, which could offer a chance to do so. Toshimitsu Motegi, the Japanese trade minister, may meet with Mr Lighthizer as early as next month. “We have a real problem. We have a situation that's not good now and it's going to get bad very quickly,” Mr Lighthizer said, bluntly acknowledging that Washington was worried about the fate of US farm products in Japan. Japanese officials had initially sought to persuade the Trump administration to reconsider its decision to leave the TPP in 2017, but they later pressed ahead to complete the pact with the other 10 remaining nations. The TPP without the US was renamed CPTPP and took effect on December 30. Meanwhile, Tokyo clinched a trade deal with the EU, which took effect on February 1. The US hopes that it could at least secure similar terms on market access as its European and Pacific rivals did. But quick progress in trade talks with Japan is not guaranteed. The US administration is still consumed by its negotiations with China, and it is unclear when they might end.

Japanese officials said they have been advised by Mexico and Canada to only negotiate with Mr Lighthizer himself, since more junior staff have no authority to commit the Trump administration. Once the talks with Japan begin, other thorny issues could emerge, including the treatment of Japanese auto exports — on which the US is still threatening to impose national security-based tariffs — as well as the US insistence on a currency provision to limit any depreciation of the yen. Mr Lighthizer has suggested that Washington and Tokyo could agree on an early deal on agriculture before moving on to the rest of the trade agreement.

Japan believes it has agreed to strictly limited talks on trade in goods, with little to discuss beyond agriculture.  Mr Harris said the pressure from US farmers had offered Japan leverage. “To the extent that Washington is seeking early results, particularly on agricultural market access to improve conditions for US producers, it is possible that Japan’s negotiating tactics could lead the US to soften some of its stronger demands in the talks,” he wrote in a note this month.

Source: The Financial Times