Evaluating the Trans-Pacific Partnership

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By Kazuhito Yamashita, VOX CEPR's Policy Portal Jan 05, 2016

The Trans-Pacific Partnership is being held up as a model for 21^st century trade agreements. This column looks into its implications for Japan. It says that agricultural sectors such as rice and beef won’t be affected as some form of protection will remain. It concludes that while the TPP may help Japan gain access to foreign markets, Japanese agriculture has lost another opportunity for revitalisation.

The Trans-Pacific Partnership (TPP), the ambitious trade agreement between Pacific-Rim countries, was agreed last October. Will Japanese tariffs be eliminated for many food products? The advantage being emphasised is that imported food will be cheaper. Other than the five key items including rice and wheat, items subject to tariff elimination such as oranges and apples have been disclosed, and there are conflicting reports with some claiming that consumers will benefit while others claiming that the agricultural sector will be hit hard.

In regard to agricultural products, if we look at the number of items, 24% is already not subject to tariffs, and the tariffs on 48% of these commodities are less than 20%, so there would not be much of a benefit if the tariffs are reduced to zero. When the quantitative restrictions on oranges were abolished in the past, in addition to countermeasures being implemented, domestic farmers started developing products such as dekopon citrus to differentiate themselves from imported items, so probably only a few farmers feel threatened. Domestically-produced cherries and those imported from the US are completely different products as well.

The price of demanding exceptions

On the other hand, with the exception of beef, all of the five key items are subject to more than a 100% tariff. Rice, wheat, sugar, butter, and skim milk powder may only account for 9% of the number of the items, but they are a big part of the Japanese diet and are also used as ingredients for foodstuffs such as bread and confectionaries. The tariffs on these items will be maintained. The 38.5% tariff on beef will drop to 9%, but that will be 16 years from now.

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