U.S. Trade Representative Robert Lighthizer and Japanese Economy Minister Toshimitsu Motegi met this week in Washington, D.C., to begin discussing the framework for a possible trade agreement between the two countries. The USTR’s negotiating objectives, which were outlined by the administration in December, include several of IDFA’s priorities. The top three call for increasing access to the Japanese market, reducing or eliminating tariffs on U.S. agricultural products and addressing technical barriers to trade.

Major Market for Dairy

Japan is the fourth-largest market for U.S. dairy exports, representing sales of more than $290 million in 2017. It’s also one of the six countries to implement in December the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a modified version of the Trans-Pacific Partnership that emerged after the United States withdrew in January of 2017.

The CPTPP changed the landscape for U.S. dairy products abroad by giving the pact’s partners preferential market access to the Asia-Pacific region. IDFA has stressed to the administration and Congress that bilateral trade agreements with Japan and other countries in the Asia-Pacific region are critically important to the continued growth of the U.S. dairy industry and the American economy.

In comments filed last November with the USTR, IDFA said negotiations with Japan must address U.S. dairy’s growing import disadvantage in the Japanese market and ensure a level playing field for American dairy companies. Currently, U.S. dairy exports face high tariffs, limited tariff-rate quotas (TRQs) and other barriers to trade in the Japanese market.

Equitable Access

“By far, our top priority is addressing our widening import disadvantage to New Zealand, Australia and the European Union (EU). The U.S. dairy industry is facing stiff competition into the Japanese market from Australia and New Zealand,” IDFA said, adding that it expects more to come from the EU under the new EU-Japan Economic Partnership Agreement (EPA).

“Market access in the U.S.-Japan trade agreement must match or exceed those achieved under the CPTPP and the EU-Japan EPA and include an accelerated phase-in of tariff cuts to ensure the U.S. is on a level playing field with the EU, Australia and New Zealand,” IDFA said. “This means equivalent or better access from both a volume and a tariff perspective.”

Tariffs and TRQs

IDFA also said the negotiations should address Japan’s restrictive TRQs and high import taxes on many U.S. dairy products. Some imports, like U.S. cheese, yogurt, casein and ice cream, have no TRQs, which means those products are subject to tariffs. Duties on U.S. cheese entering the Japanese market range from 22.4% to 40%.

U.S. dairy imports that have TRQs also are restricted. In-quota purchases are subject to tariffs up to 35%, and out-of-quota purchases receive additional duties.

Technical Barriers

IDFA called for strong sanitary and phytosanitary (SPS) and geographical indications (GIs) provisions to ensure the U.S. dairy industry can compete on a level playing field. IDFA asked USTR to use the provisions included in the U.S.-Mexico-Canada Agreement (USMCA) as a way to address technical barriers to trade, as well as protect the use of common food names.

IDFA will continue to work with federal officials and members of Congress to expand opportunities for dairy in trade agreements and and seek more market access for dairy products abroad.

For more information, contact Beth Hughes, IDFA senior director of international affairs, at bhughes@idfa.org.