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Economy

Japan looks to use beef levies as leverage in US trade talks

Safeguard triggers kept in place, for now

The U.S. is expected to press for revised safeguards on beef exports when it meets Japanese negotiators in trade talks next year.   © Reuters

TOKYO -- The Japanese government has decided not to change the conditions for introducing safeguard tariffs on beef imports, holding on to a bargaining chip that could be used in coming trade talks with the U.S.

Under the current safeguard rules for beef, tariffs automatically shoot up to 50% from 38.5% if the quarterly import volume exceeds the year-earlier figure by more than 17%. The higher tariffs then last through the following March, the end of Japan's fiscal year.

But recent trade agreements, such as the Trans-Pacific Partnership, increasingly require extending the review period to yearlong timelines.

Japan's Ministry of Finance considered lengthening the period to six months or a year in keeping with international trends, but decided to keep the framework as is for fiscal 2019. Probably informing the decision are bilateral discussions with Washington on a trade agreement on goods, or TAG, which could begin as soon as next month. U.S. negotiators are strongly expected to press for concessions on American beef exports within that forum.

Beef safeguards were triggered for the first time in 14 years on frozen beef in August 2017, and were subsequently lifted this March. Japan imports 90% of its beef from the U.S. and Australia. But when Australia signed an economic partnership agreement with Japan, it was exempted from the safeguards.

With U.S. beef placed at a competitive disadvantage, the protectionist Trump administration objected to the safeguards. Since the White House may well raise the issue in the renewed trade talks, "there is no reason to purposely change the system ahead" of those negotiations, said a source close to the Japanese government, hinting at the safeguards being used for leverage.

The safeguards are based on accords reached during the Uruguay Round of the General Agreement on Tariffs and Trade, which ended in 1994. But there is a case to be made for a longer review period. During the first quarter of this year, beef imports were limited as buyers waited for the safeguards to be lifted at the end of March. Imports then spiked in the April-June quarter, igniting fears that the safeguards will be triggered once again.

The status quo "goes against the purpose of the system, which is to ensure stability in imports," said a Finance Ministry source.

The Finance Ministry will spell out its policy on beef safeguards in the general tax policy outline for fiscal 2019, and will submit a bill to the regular parliamentary session next year.

Tokyo will enter the TAG trade talks with the U.S. with the intention of maintaining levels on farm produce agreed upon in the TPP. President Donald Trump pulled the U.S. out of the multilateral agreement, and the remaining 11 countries have negotiated a revised TPP that will go into effect Dec. 30.

"If TAG negotiations produce an outcome on beef that aligns with the TPP, then safeguards will follow what is in the TPP," a senior Japanese customs official pointed out. "The current system could be abolished."

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