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Japan May Offer Canada Head Start on Pork Duty to Sway U.S.

May 2, 2014
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Japan, the world’s largest pork importer, may accelerate tariff talks with Canada to increase pressure on the U.S. to ease demands for cuts in agricultural protection, the Asian nation’s biggest hog farmers group said.

Canada, the largest pork exporter after the U.S. and the European Union, has been in talks with Japan on a bilateral trade pact since November 2012. Japan agreed to almost halve its tariff on Australian pork under a deal reached earlier this month between the two governments. The four countries are among 12 nations negotiating the Trans-Pacific Partnership.

"Canada is eager to boost pork sales to Japan and may seek treatment similar to what Japan gave to Australia," Takashi Koiso, a director at Japan Pork Producers Association, said in an interview in Tokyo. Lawmakers from Prime Minister Shinzo Abe’s ruling Liberal Democratic Party said the tariff reduction Japan offered to Australia is a "red line" for the TPP.

U.S. Trade Representative Michael Froman and Japanese Economic Minister Akira Amari concluded talks on the TPP in Washington on April 18 without striking a deal on some of the most contentious issues. Japan should agree that it won’t seek exemptions for goods including agricultural as it seeks to complete the deal, Froman said on April 3. President Barack Obama will discuss trade and security with Abe in Tokyo tomorrow.

‘Undermined’
"We cannot accept tariff cuts beyond the level agreed to with Australia, or our industry will be undermined," said Hisao Kuramoto, the pork association’s managing director.

Costs to produce pork for Japanese farmers are more than double those in the U.S. and Canada as the Asian nation imports almost all of its feed grains. Corn and soybean futures in the U.S., the largest supplier to Japan, have climbed 19 percent and 13 percent this year respectively.

Unlike beef, pork in Japan is produced from breeds coming from overseas, making it difficult to differentiate the quality of the meat from imported products, Kuramoto said.

The nation is the world’s biggest corn importer and bought 6.4 million metric tons last year from the U.S., the top exporter. Japan is also Asia’s second-largest soybean buyer.

If the U.S. pushes through its demand of eliminating tariffs on pork, Japan may see as much as 70 percent of local production, or more than 630,000 tons, displaced by imports, leading to job losses for an industry with about 250,000 employees, Koiso said.

Pork Imports
Japan imported 738,455 tons of pork worth 390 billion yen ($3.8 billion) last year, of which 281,139 tons, or 38 percent, was from the U.S., according to the agriculture ministry. Canada was the second-biggest supplier with 142,212 tons, followed by Denmark with 113,951 tons.

The Asian nation depends on imports for about half of its supply after the government removed a limit on the volume of purchases in 1971. In the same year, Japan introduced a so- called difference tariff system for pork, curbing an influx of cheap meat and supporting domestic prices for local farmers.

The country imposes 4.3 percent tariff on imports if the price from overseas is above 524 yen ($5.12) a kilogram. If the price of imported meat is under the level, the government collects duties to fill in the difference between the standard price and actual import price, blocking the entry of cheap products.

Eliminating the pork tariff under the TPP pact could benefit Chile and Mexico as South American nations can supply cheaper products than the U.S., said Akihiko Hirasawa, an economist at Norinchukin Research Institute Co. in Tokyo.

Hog futures for June settlement were little changed at $1.23225 a pound at 2:04 p.m. Tokyo time. The price has climbed 44 percent this year.

Japan agreed to cut the tariff on Australian pork to 2.2 percent from 4.3 percent, within a quota that limits volume to 6,700 tons in the first year and rises to 16,700 tons within five years, according to the Agriculture Ministry.

If completed, the TPP accord would be the biggest trade deal in U.S. history, linking a region with about $28 trillion in annual economic output, about 39 percent of the global total. Other members include Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

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