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Prior to his departure for bilateral negotiations over the Trans-Pacific Partnership (TPP) with U.S. Trade Representative Michael Froman, Japanese Minister of State for Economic and Fiscal Policy Akira Amari—who oversees Japan’s participation in the 12-nation TPP negotiations—didn’t mince words on his expectations. According to Jiji Press:
This coming meeting has to be the final ministerial talks between Japan and the United States on the TPP, Amari told reporters at Narita International Airport near Tokyo before leaving for the U.S. capital, with an envisioned broad TPP agreement among the 12 negotiating countries in November in mind.
Against this backdrop, Richard Katz, a highly regarded observer of U.S.-Japan relations for more than three decades, has attracted attention in recent days for his incisive comments on the high cost of Japan’s agricultural protectionism for Japan.
Katz’s observations go to the heart of the Amari-Froman negotiations because Japan’s barriers to agricultural trade are at the heart of the impasse in the U.S.-Japan negotiations. By extension, they are also central to the overall TPP negotiations as the other 10 nations await this outcome before moving forward with their own market access deals.
The following is excerpted from Katz’s three-part survey of “The Cost of Japan’s Farm Protectionism” in The Oriental Economist Report, where Katz is Editor-in-Chief.
- “The cost to Japan’s economy and Japanese consumers of protecting Japan’s farmers from imports, as well as other anti-competitive practices, is several times the contribution of farming to national GDP.
- “Japanese consumers have to devote 14% of their household budget for food, compared to 9.3% in the UK and 6.3% in the U.S.; if that could be reduced in Japan to even 11%, that would save Japanese consumers ¥7.5 trillion per year, far more than the entire GDP of the farm sector (¥5.4 trillion), and twice as much as the output of the five ‘sacred’ sectors (¥3.6 trillion).
- “Taxpayers pay for subsidies that provide half of all farmers’ income; in 2009, these subsidies amounted to ¥4.3 trillion ($46 billion), more than the ¥2.5 trillion per year taken by the most recent hike in the consumption tax …
- “In short, barriers to imports have become obstacles to Japan’s own exports.”
The promise of the TPP has always been that it will be an ambitious and comprehensive trade and investment accord, covering all products and sectors. While there is ample room for an outcome in which “both sides make an even compromise,” as Amari told the press, Katz’s analysis underscores that it is squarely in Japan’s own interest to open its agricultural sector.
The TPP thus has the potential to help Japanese consumers by lowering the price of food and the Japanese economy more broadly by limiting the fiscal cost of agricultural subsidies and by expanding industrial exports. None of this should be scary, as tariff protection can be phased out over time while the Abe government adds some substance to the agricultural reforms of which Prime Minister Shinzo Abe has spoken and then actually implements them.
A better future for Japanese agriculture lies ahead, but only if Japanese leaders are willing to start the process of change. As Katz puts it: “It is Japan, not America, which has the most to gain from liberalizing its agricultural market via TPP.”