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Economy

US beef and pork squeezed in Japan by free trade alternatives

Disgruntled American ranchers loom over bilateral talks

Japan's beef imports from Canada more than tripled in February.   © Reuters

TOKYO -- Japan is importing more pork and beef from European and North American free trade partners in a shift from the U.S. that may impact Tokyo's upcoming trade negotiations with Washington.

Japan's pork imports from the U.S. fell 14% on the year in February, while imports from the European Union jumped 54% and from Mexico and Canada each grew nearly 20%, shows Ministry of Finance data out Thursday. The Japan-EU Economic Partnership Agreement, which took effect that month, lowered duties on certain pricey pork products to 2.2% from 4.3%, while tariffs on Mexican and Canadian pork are lower under the 11-member Trans-Pacific Partnership.

These free trade deals have created vast blocs excluding the U.S. that offer lower tariffs on agricultural and industrial goods. Japan is set to drop meat tariffs still further in April under the TPP-11. Pressure on the White House from disgruntled cattle ranchers will likely put more heat on Tokyo when the two sides sit down as soon as next month to hash out a trade agreement on goods.

The EU accounted for roughly 44% of Japan's pork imports in February, up from a monthly average of 35% in 2018, while the American share dropped to 23% from 28%.

With Japanese hungry for beef from abroad, February imports of the meat from the U.S. rose 17% on the year. But this paled beside the deluge from other TPP-11 members, with imports from Canada soaring roughly 260% and those from New Zealand rising 63%, as tariffs softened to 27.5% from 38.5%.

The American share of Japan's beef imports for January and February came to 39%, compared with an average of 41% across 2018. The decline marked a break from its steady growth since Japan resumed imports from the U.S. in December 2005, after pausing over the outbreak of mad cow disease.

Japan is set to implement its second tariff cut under the TPP-11 on April 1, the start of the country's fiscal year, bringing levies to 26.6% for beef and to 1.9% for high-priced pork products. The pact, which was formed with 11 members after U.S. President Donald Trump backed out, took effect Dec. 30 after being ratified by six members: Japan, Canada, Australia, New Zealand, Mexico and Singapore.

Slices of beef go onto the grill at a Japanese barbecue. The country's imports of Canadian beef tripled year-on-year in February.

A focal point going forward will be Canadian beef, particularly the grain-fed variety favored by Japanese. Flying Garden, a burger chain focused on areas in Tokyo's northern outskirts, as of Thursday lowered prices of some steak cuts made from Canadian beef by 171 yen ($1.55) per 100 grams.

Similar trends look likely for Australian beef. A drop in tariffs on refrigerated goods will put it more in reach for supermarkets, according to a meat wholesaler.

Even beyond meat, signs of tectonic shifts have appeared in the trade landscape. Under the TPP-11, Japan's import quotas for Australian rice are set to triple in April to 6,000 tons -- a matter of great interest to the restaurant industry, as the grain sells for around 30% to 50% less than Japanese-grown rice. Moreover, sales of European wine have risen 10% or so at upscale supermarket chain Seijo Ishii after it lowered prices last month.

The shift away from procuring food and agricultural goods from the U.S. indicates a certain level of success in Tokyo's strategy of pursuing free trade agreements to shield itself against American protectionism.

But the "America first"-focused Trump administration looks unlikely to bring Washington back into the free trade camp. Japan's trade deals will knock $550 million a year off American beef exports by 2023, the U.S. Meat Export Federation estimates. The dissatisfaction of American cattle ranchers will likely reverberate in coming bilateral trade talks.

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