On Monday, President Trump oversaw the signing of two limited trade deals with Japan, slashing tariffs on $7.2 billion worth of America's agricultural exports.
U.S. negotiators have been working to develop new trade agreements with Japan and other countries in the wake of U.S. withdrawal from the multinational Trans-Pacific Partnership process (TPP)
The Japan bilateral agreement keeps intact essentially all the trade benefits the United States would have gained in Japan under TPP.
The agreement immediately eliminates all tariffs on U.S. exports of sweet corn, almonds, broccoli and prunes, among other things.
Other tariffs on products such as ethanol, cheese and whey, fresh cherries and other farm and ranch products will be phased out over a number of years.
The U.S. will also benefit from increased export quotas on products such as corn starch, malt, potato starch, fructose and more.
The deals cover roughly $55 billion in trade, about a quarter of the nearly $218 billion in goods traded between the two countries.
Grain industry reactions
The National Grain and Feed Association (NGFA) commends the United States and Japan for consummating a stage one trade agreement that will preserve significant market access for U.S. agricultural products, including wheat and wheat products, pork and beef.
"Japan represents America’s third largest agricultural market, and this agreement was essential so that U.S. agricultural products were not put at a competitive disadvantage compared to the preferential tariff treatment accorded the 10 other countries signing onto the Comprehensive and Progressive Agreement for TPP following the United States’ withdrawal from the TPP trade accord, as well as the Japan-European Union trade agreement," says NGFA President and CEO Randy Gordon. "NGFA is grateful President Trump and Prime Minister Abe and their respective trade negotiators worked intensively to complete this agreement in a remarkably short, one-month period."
U.S. Grains Council (USGC) Chairman Darren Armstrong, a corn farmer from Hyde County, NC, says the agreement provides certainty and stability in our second largest corn market, brings sorghum imports to a zero tariff level immediately and reduces the import markup on barley.
"We anticipate additional market access measures related to ethanol to be addressed in the next round of negotiations with Japan coming soon," says Armstrong.
Wheat provisions
The agreement will also provide imported U.S. wheat the same preferential advantage that is now given to Canadian and Australian wheat under the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP).
“As we hoped, the text confirms that the agreement will put U.S. wheat back on equal footing with wheat from Canada and Australia when it is implemented,” says U.S. Wheat Associates (USW) President Vince Peterson who attended the event at the White House. “In addition, Japan has agreed to open country specific quotas for U.S. wheat and wheat product imports. The Trump Administration and negotiators for both countries clearly understood what was at stake for U.S. wheat farmers and made sure to have our backs in this agreement.”
As USW and the National Association of Wheat Growers (NAWG) noted when President Trump and Prime Minister Abe announced the tariff agreement last month in New York, Japan’s effective tariff on imported U.S. wheat will drop to the same level Japanese flour millers now pay for Canadian and Australian wheat.
Since the CPTPP agreement entered into force last December, market factors have kept U.S. wheat competitive. Without this new agreement, however, U.S. wheat imports would have become less and less cost competitive to the point that Japan’s flour millers would have no other choice than to buy more of the lower cost wheat from the CPTPP member countries.
Next step: China and beyond
Looking forward to this week's trade talks with China, American Farm Bureau Federation President Zippy Duvall says he hopes this trade deal inspires others.
“We hope the momentum from this win carries through to the negotiations with China this week and sets the stage for similar bilateral agreements with other countries involved with the CPTPP," says Duvall. "We appreciate this administration’s efforts to improve trade opportunities for farmers.”
