Speaking at a panel discussion on the Japan-US relationship at the USDA Agricultural Outlook Forum earlier this week, USMEF economist Erin Borror warned that unless the US secured better access terms with Japan for red meat, it would find it tougher to compete with markets such as Australia, the European Union, Canada, New Zealand, Mexico and Chile, which have preferential trade agreements.
She said that “Japan is the leading value destination for both US beef and pork”, with 2018 exports expected to reach $2.1bn and $1.65bn, respectively, when year-end data is available.
Borror explained that beef and pork made up a significant portion of US agricultural exports to Japan. The projected $3.92bn in combined red meat product exports represented about 30% of the $13bn in total US agricultural exports to Japan, second only to grains and feeds.
It was stressed that without a US-Japan trade agreement, potential losses for the US meat industry could be “substantial”.
She said US exporters were already feeling the effects of tariff disadvantages of 11 percentage points for beef cuts and 6.4 percentage points for beef tongues and skirts. For pork, the most immediate impact was on processed and value-added products, where tariffs were quickly being phased to zero. According to USMEF, this is already eroding US market share for products such as ground seasoned pork. Japan’s imports of US ground seasoned pork were valued at $288m last year.
“Unless the US and Japan can quickly reach a trade agreement, lost opportunities will mount, as Japanese companies seek more value-added, further processed products from suppliers such as the EU and Mexico,” Borror said. “Decisions that are being made today will transform the business and, without clear indications that the US and Japan will reach an agreement, the US industry is likely to suffer permanent losses in market share and related investment. Japan is irreplaceable as a trading partner, given its demand for high-value chilled pork cuts, and it is seen as an increasingly important market for value-added pork. At a time when US companies are looking to produce more value-added and branded products, the industry cannot afford to miss these opportunities in Japan.”
Borror warned that these lost export opportunities also carried serious implications for US agriculture and the rural economy.
“Exports to Japan are estimated to directly support more than 4% of the jobs in the meat packing and processing industry,” she said. “Absent a trade agreement with Japan, an annual cost of $5.2bn in direct economic losses to other businesses and industries will result in the top 15 meat packing and processing states. Over the next 10 years, an estimated 23,600 jobs outside the meat industry would be lost in those 15 states.”
At the forum, Borror also detailed the impact of ongoing trade disputes on US red meat exports, including imposition of retaliatory duties on US pork by China and Mexico.
“Retaliation has weighed less heavily on US beef exports, which were record-large in 2018 and surged by more than $1bn over the previous year. Pork export volume held steady with the record pace of 2017, but export value was pressured greatly in the second half of the year, following retaliatory actions by China and Mexico,” she said.
Borror explained that retaliatory tariffs had been paid by the US pork industry, as prices for hams, picnics, feet and hocks – key items for export to Mexico and China – were down an average of about 20% from June through December last year, and this translated into year-on-year losses of $11.75 per head. Industry losses, just for these products, amounted to $860m.