Good trade news, and a stall
Details about the U.S. beef agreement with Japan have been leaked, but China remains a conundrum.
Steve Dittmer, Commentary, BEEF Magazine
Oct 03, 2019
Dittmer is executive vice president of the Agribusiness Freedom Foundation
BEEF readers have already read about the Trump administration’s success in finally achieving the beginning of tariff reductions for beef into Japan. What we’ve failed to accomplish in 40 years he has managed, with his atypical style, in a couple years.
There are some reasons for optimism from Canada’s export experience in Japan and China. After all, Canada is the only other volume producer of high quality, grain-fed beef.
Since getting the reduced tariffs available under the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) agreement, Canadian numbers into Japan have shown great demand for grain-fed beef, although on a smaller scale, notching increases of +59% from January – July for 2019, amounting to $194 million in Canadian dollars, according to Government of Canada figures.
Canadian numbers into China also reflect great demand for grain-fed beef; January – July, increases of +207% to $98 million. That all came to a screeching halt when China quashed beef imports from Canada after Canada’s arrest of Meng Wanzhou, daughter of Huawei’s CFO and founder. Meng is going through preliminary hearings now and the main hearing will be in January. No one seems to know if she is extradited to the U.S. if China will relent.
However, some details about the Japan agreement were reported by Nikkei Asia out of Tokyo that haven’t been reported elsewhere. Agreement details haven’t been reported by the U.S. Trade Representative’s office.
The story reported the lower tariff U.S. beef quota would be set at 240,000 metric tons (mt) to start, about 90% of what we sell Japan now. Over time, the quota would increase to 290,000 mt.
The drop to a 26.6% tariff would occur in the first year, to match the levels for CPTPP members. They reported that these safeguards were to prevent a big surge of imports damaging domestic producers.
Nikkei reported that Japan’s total CPTPP quota is 600,000 mt, meaning with the additional U.S. quota, Japan could import up to 840,000 mt qualifying for the lower tariffs.
Interestingly, their information was that Japan wanted to renegotiate the quota with CPTPP, as the beef shipped in fiscal 2018 came in at only 360,000 mt, well below the cap.
It might be wishful thinking, but it would be nice if reducing the CPTPP quota, unused by CPTPP countries, could potentially leave more room to increase the U.S. quota. After all, the 20% increase in the U.S. quota over 15 years does not allow for the kind of growth we could expect, given lower tariffs and the Japanese consumer demand for American beef.
Of course, the quota affects the volume subject to the lower tariffs. That could mean we could still sell more at the higher tariff levels, just like we have been for decades.
Canadian Cattlemen’s Association’s John Masswohl sees the potential for a two-way win for Canadian cattlemen out of this situation: Canada continuing to sell more Canadian beef directly to Japan and selling more beef to the U.S. for Americans to sell to Japan.
So what about China? ...
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