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International relations

Japan to remove tariff on US wine under trade pact

Gradual reduction over 5 to 7 years matches timeline set under the TPP

Prices for wine from Napa Valley will go down once tariffs are cut under the U.S.-Japan trade pact.   © AP

TOKYO -- Japan will eliminate its 15% tariff on U.S. wine imports in five to seven years under a bilateral trade agreement expected to be signed at the end of the month.

The deal will bring down price of American wine in Japan by about 10%, making it competitive against European imports and offering more options for consumers. European wine already enjoys non-tariff status under a Japan-EU economic pact that took effect this year.

Japanese Prime Minister Shinzo Abe and U.S. President Donald Trump agreed to a broad trade pact framework in late August, with the two leaders expected to ink a formal deal later this month on the sidelines of the United Nations General Assembly meeting in New York. The deal will also gradually reduce Japan's 33.5% tariff on American beef to 9% by April 2033.

Along with beef and pork, wine is a top export for the U.S., and some in Washington had demanded an immediate repeal of the tariff. But the U.S. once agreed to a phased reduction over an eight-year period under the Trans-Pacific Partnership, of which the country was part of until its withdrawal under Trump.

Given those past negotiations, both sides agreed to bringing down the tariff to zero in five to seven years, around the same time the levy would be have been eliminated had the U.S. stayed in the TPP.

Currently, Japan imposes a tariff of 15% or 125 yen ($1.12) per liter on U.S. wine, whichever is cheaper. The average import price for U.S. wine is around 864 yen per liter without the tariff, and about 990 with the tariff. The removal of the levies will reduce the cost for distributors by roughly 13%, leading to lower retail prices.

Chile is the top provider of foreign wine in Japan, accounting for 31% of the market in 2018, followed by France and other European countries. The U.S. with a 6% market share is in sixth place, after fifth-ranked Australia.

The tariff on Chilean wine had already been cut in 2007 under a bilateral economic agreement, while the levy on Australian wine has been lowered to less than 4% under a bilateral pact that took effect in 2015.

Japan's tariffs on wine imported from TPP member nations, such as New Zealand, are set to go down in phases under the revamped trade partnership, which took effect in December last year. Currently the tariffs are set at 8.5% or 125 yen per liter.

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