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2014 Media Kit

Impact of TPP free trade pact on Japan farm sector

By: | at 07:00 PM | International Trade  

Japan is weighing benefits and drawbacks from joining a proposed Trans-Pacific Partnership (TPP) free trade agreement, launched earlier this year by the United States with seven other countries.

Economics minister Banri Kaieda supports the trade initiative to keep Japan’s firms from moving abroad, but some lawmakers in the ruling Democratic Party are reluctant to upset farmers, who have huge political clout under an electoral system that gives rural votes more weight than those in urban areas.

Talks for another type of trade deal, in the form of bilateral economic partnerships, have so far left out Japan’s heavily protected agriculture sector, but TPP would not allow that as it in principle requires all tariffs to be abolished.

Here are some facts about Japan’s agriculture sector:

Industry Data

  • The number of people engaged in agriculture is 2.6 million, accounting for about 4 percent of Japan’s total work force of 65.87 million as of December 2009, according to government data.

In 1985 the farming population stood at 5.43 million.

  • Farmers’ average age is 65.8 years.
  • Japan’s food self-sufficiency rate is 40 percent.

Economic Impact

  • In a projection based on 19 products selected to assess the impact of TPP, the farm ministry says joining the pact would shrink gross domestic product (GDP) by 7.9 trillion yen or 1.6 percent in real terms.
  • The 19 products include rice, wheat, barley and meat, but exclude forestry or maritime products.
  • The Cabinet Office, in contrast, estimates TPP participation would actually boost real GDP by about half a percentage point annually after taking into account the adverse impact on the agricultural sector.
  • Japan’s unadjusted GDP totalled $1.2883 trillion on a nominal dollar basis in the second quarter. Farm output accounts for about 1 percent of GDP.

Major Import Origins

  • In 2008, 32 percent of agricultural products used in Japan were imported from the United States, followed by 12.8 percent from the European Union, 9.3 percent from China, 8 percent from Australia and 7.4 percent from Canada, according to farm ministry data.
  • Corn: Japan is the world’s biggest importer of corn, with the United States supplying 98.7 percent in 2008. Japanese corn production is negligible.
  • Wheat: Imports from the U.S. in 2008 accounted for 60.6 percent of the total, followed by 23.7 percent from Canada and 15.5 percent from Australia. Japan buys about 5 million tonnes of foreign wheat a year for milling use, which accounts for about 90 percent of domestic consumption.
  • Soybeans: The U.S. was the biggest supplier with 72.3 percent, followed by Brazil’s 15.2 percent and Canada’s 9.3 percent in 2008.
  • Beef: Australia accounted for 76.3 percent of Japan’s beef market, followed by 14.1 percent from the U.S. and 6.1 percent from New Zealand in 2008.

Products Mostly Affected

  • Rice: Japan produces more rice than it consumes, but it must purchase some 770,000 tonnes of rice a year from overseas—roughly equivalent to 9 percent of annual consumption—as part of an international trade agreement. Japan puts a 778 percent tariff on rice. The farm ministry estimates rice production would shrink by 48 percent, or 1.97 trillion yen in value on an annual basis, by far the largest damage of any product.
  • Wheat: Japan puts a 252 percent tariff on wheat, and removing it would allow milling products to enter Japan, pushing domestic mills out of operation, the farm ministry says.
  • Japan imposes tariffs on about 25 percent of farm product imports from the United States, about 30 percent of products from China and about 30 percent from the EU.
  • Some farm products carry a tariff of around 1,700 percent, while average non-farm tariff levels are close to zero, with those in place being less than 10 percent.

Bilateral Issues

  • Even if Japan decide