After announcing its intent to enter talks with the Japanese government on a bilateral trade pact, the Office of the U.S. Trade Representative (USTR) is now developing negotiating objectives and seeking industry input. In comments filed this week with the USTR, IDFA said these objectives must address U.S. dairy’s growing import disadvantage in the Japanese market and ensure the U.S. industry can compete on a level playing field.
Japan is U.S. dairy’s fourth-largest market abroad, representing sales of more than $290 million. However, U.S. dairy exports still face high tariffs, limited tariff-rate quotas (TRQs) and other barriers to trade in the Japanese market, IDFA said.
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.
Australia and New Zealand will gain increased Japanese market access for butter, cheese, milk powders and whey on Dec. 30, when the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is expected to enter into force. The EU is also poised to enter a free-trade agreement with Japan (EU-Japan EPA) in February, under which it will gain more market access for its cheese, butter, evaporated milk, milk powder and whey products.
“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 stressed that the proposed bilateral pact 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 all of those products entering the Japanese market are subject to tariffs. Duties on cheese range from 22.4 percent to 40 percent.
U.S. dairy imports that have TRQs, IDFA said, also experience restrictions. In-quota purchases are subject to tariffs up to 35 percent, and out-of-quota purchases are subject to additional duties.
Japan also has a government body, called the Agriculture and Livestock Industries Corporation (ALIC), that tightly controls the supply of imports.
IDFA stressed that the pact must include market access gains across all dairy products and eliminate the ALIC’s influence on future U.S. quotas.
Technical Barriers
IDFA also called for strong sanitary and phytosanitary (SPS) and geographical indications (GIs) provisions to be incorporated in the bilateral pact with Japan 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 examples of ways to address technical barriers to trade, as well as protect the open use of common food names.
Next Steps
Under Trade Promotion Authority (TPA), the administration will consult with congressional committees of jurisdiction and then publish a detailed summary of negotiating objectives on USTR’s website. TPA mandates that USTR must publish these objectives at least 30 days before official negotiations begin.
For more information, contact Beth Hughes, IDFA senior director of international affairs, at bhughes@idfa.org.