By Jennifer Dorsett
Field Editor
Japan has been importing so much U.S. beef, it may become a case of “too much of a good thing.”
Under the terms of the U.S.-Japan Trade Agreement, annual volume-based safeguards were put into place allowing for a temporary Japanese tariff increase when imports surpass a predetermined trigger level.
For Japan’s fiscal year 2020, which runs from April 2020 to March 2021, the safeguard is set at 242,000 metric tons (MT).
If Japanese imports of U.S. beef exceed that volume, tariffs on U.S. beef will temporarily rise from 25.8 percent to 38.5 percent, according to a recent U.S. Department of Agriculture (USDA) Foreign Agricultural Service (FAS) report.
Through Dec. 31, 2020, the U.S. exported 198,826 MT, or 82.2 percent of the preset volume. If the threshold is passed in January, higher tariffs will go into effect until March 31, 2021.
“It’s something we’ll need to continue to monitor,” Kent Bacus, director of International Trade and Market Access for the National Cattlemen’s Beef Association (NCBA), told Agri-Pulse. “I hope it’s something that can be avoided, but we are pretty close to hitting that.”
If the annual volume is surpassed in February or March, the tariff increase is only active for 45 or 30 days, respectively. But any tariff increase would be a setback, according to Bacus.
“Obviously, when you raise the price on a hot commodity like beef in such a prolific market like Japan, that could have some temporary restrictions on our sales,” he said.
NCBA is not the only organization watching the issue carefully, said Erin Borror, U.S. Meat Export Federation (USMEF) economist.
She explained because the U.S. is the only beef supplier approaching the safeguard threshold, USMEF is concerned chilled exports to Japan may decline if the “snapback” tariff rate goes into effect.
USMEF is concerned any higher tariffs may be in effect in the weeks and days leading up to Japan’s Golden Week, a series of national holidays that occur annually from April 29 to May 5.
Preparation for Golden Week is a key time for Japanese buyers looking to celebrate with beef, Borror noted.
Even with the COVID-19 pandemic causing major supply and demand issues, U.S. beef exports to Japan remained the same as or better in 2020 than 2019, according to USMEF.
Japan, the largest export market for U.S. beef and the third-largest agricultural export market overall, purchased 280,954 MT of beef worth about $1.8 billion from January to November 2020.
USMEF data shows the majority of the trade—238,539 MT or $1.4 billion—was in valuable muscle cuts.
It remains to be seen if Japan will actually enact the safeguard, which is designed to protect domestic cattle raisers.
In 2019, U.S. representatives negotiating the new agreement convinced Japanese officials to eliminate quarterly safeguard volumes put in place in 1994’s World Trade Organization (WTO) Uruguay Round.
The yearly volume put in place in the 2020 U.S.- Japan Trade Agreement was supposed to pose a lesser chance of trade disruption. Under the latest agreement, there’s an option for the two nations to renegotiate if the safeguard is ever triggered.
Those discussions may end up happening soon, Baccus said.
“These are conversations that we’ll need to have, so our governments can figure out the best path forward,” he said. “This is something we need to pursue, because it’s overwhelmingly clear that Japanese consumers want more U.S. beef.”