Japan and the EU finalized negotiations of the Japan-EU Economic Partnership Agreement (EPA) in December 2017. The agreement, like the Trans-Pacific Partnership (TPP), represents a pivot by Japan which traditionally has been extremely protective of the country’s pork producers. But under the EPA, Japan agreed to eliminate tariffs on more than 60 percent of its pork and pork product tariff lines within 12 years. The agreement also eliminates a 20 percent duty on EU-origin ground seasoned pork over five years and a 10 percent duty on sausages over five years. An 8 percent duty on ham and bacon will be lowered to 2.2 percent in five years and phased out completely in 12 years, ERS reported. Another benefit of the EPA to the EU is a volume-based safeguard for EU pork imports that will be phased out over 11 years, ERS explained.
“Japan has historically been a major export destination for US pork. However, agricultural exporters from the United States will face challenges as the EU gains preferential tariffs under the Japan-EU EPA,” ERS said in its report. “Similar to the TPP, where US competitors are gaining preferential access to important export markets, the EU-Japan agreement threatens to cut into US market share and depress profits for US pork producers who depend on export markets for over 20 percent of their income.”
The EU is a strong competitor with the US when it comes to market share of agricultural imports in Japan. In 2017, Japan ranked as the world’s largest importer of pork and pork products. The country grew its imports to $5.2 billion in 2017 from $4.9 billion which represents a 6 percent increase, the ERS said in its trade report. The top imported pork products in Japan are frozen pork and fresh/chilled pork. The US was Japan’s top pork supplier for more than a decade, ERS said, until 2017 when the EU matched US pork market share at 33 percent. The EU leads the market in frozen pork exports to Japan which were valued at $1.6 billion in 2017.
“The EU has been able to dominate Japan’s frozen imports, with decreasing volumes from the United States and Canada because it supplies high-value cuts such as single-ribbed bellies and loins for use in Japan’s bacon and loin-ham processing industry,” ERS said. “The United States is the main supplier of fresh/chilled pork accounting for 53 percent of the market. Fresh and chilled pork is primarily consumed by the hotel, restaurant and retail sector and requires short delivery times where the US holds an advantage. The EU has largely been uncompetitive in the fresh/chilled pork sector.”
Exports of beef to Japan also will receive favorable duty treatment. Beef will also be affected. Tariffs on beef and veal will drop to 9 percent from 38.5 percent. An initial duty reduction reduced the tariff to 27. 5 percent.
From global markets, Japan imported an average of $53 billion annually in agricultural goods between 2013 and 2017, according to ERS. The US held 25 percent market share compared with the EU, which held a 13 percent market share of agricultural imports in Japan. The top US agricultural exports to Japan are corn, beef, pork, soybeans and wheat which accounted for 62 percent of US agricultural exports to Japan in 2017.