WTO Negotiations and Other Agricultural Trade Issues

in Japan

byMasayoshi Honma

New Development of Agricultural Policy since UR

• Tariffication of rice in 1999• Basic Law on Food, Agriculture, and Rural Area in 19

99• New WTO negotiations on agriculture since 2000• EPA (FTA) with Singapore in 2002• Establishing Rice Policy Reform Plan in 2002• Negotiations for FTA with Mexico and Korea in 2003

Article 20 of AoA

Recognizing that the long-term objective substantial progressive reduction in support and protection…is an ongoing process, Members agree that negotiations for continuing the process…, taking into account:

(c) non-trade concerns,…

General Elements of Negotiations

• Elimination of tariff peaks in dirty tariffication

• Reduction or elimination of export subsidies

• Reexamination of domestic support criteria

• S&D treatment for developing countries

From “Bringing Agriculture into the GATT” to “Bringing Agriculture into Competition”

Some Issues for Japanese Agriculture

• Multi-functionality of agriculture

• Food security and safety

• Tariff peaks

Multi-functionality• Multi-functionality of agriculture, such as land

conservation, natural environment, rural community, is now recognized.

• Need to evaluate the marginal effect of trade on multi-functionality

• But its relationship with agricultural production is not straightforward and make quantitative assessment difficult.

• Direct subsidies are encouraged to achieve it.

Food Security and Safety

• Food security cannot be pursued through self-sufficiency from domestic sources but through relying also on imports.

• Limiting trade is not the correct measure to achieve it at a minimum social cost.

• Stockpiling is a short time measure. • Safety is consumers’ legitimate concern,

while too strict standard tend to impede food trade: compliance to SPS and need for capacity building for developing exporters.

• Examples of tariff peaks

Japan: rice (490%), butter (330%),

konnyaku-potato (990%)

Korea: Korean carrot (754%), cassava (887%)

• Capping the maximum tariff at 100%?

Tariff Peaks

New Dimensions of Negotiations

• Importance of developing countries• Shift of major players to three cores: (a) US, EU (b) Developing countries (c) Japan, Korea, other food importers.• Weakening power of Cairns Group• Emerging African countries: Cotton initiative• Shift to FTA for trade liberalization

Bilateral Trade Issues(A) Japan vs. China: Safe-guard issues against three

agricultural imports in 2001

Retaliation by China would have cost 400 billion yen on automobile industry

(B) Japan vs. Mexico: Pork and orange juice on FTA

(C) Japan vs. Korea: FTA negotiations

How to treat agricultural sector?

Characteristics of Agriculture in Japan and Korea

Japan Korea

Share in GDP Small Small

Farm size Small Small

Ratio of full-time Low High

Family income Large Medium

Income from farming Small Large

Ratio of aged farmers High but　part-time

High and full-time

Problems in Japan• Regulations on entry in agriculture from non-

agricultural sector　　　　　• Part-time farming dominant in rice production

• Expectation on farm land to convert to other use

Problems in Korea• Full-time but aged farmers

• Heavy dependence on rice production

• Less job opportunity in rural area

Agricultural Trade between Japan and Korea

Japan → Korea: cigarettes, vegetable seeds, prepared feed, candies, etc.

Korea → Japan: chestnuts, tomatoes, cucumber, matsutake, bell peppers, etc.

Japan’s comparative advantage in: high quality of beef and rice (?)

Korea’s comparative advantage in: horticultural products, milk products, pork, cut flowers (?)

Effects of Japan-Korea FTA by Kawasaki(2003) Changes in trade balance (million

US$)

Changes in production (%)

Japan Korea Japan Korea

Grain 42 -45 -0.32 0.94

Meat -346 883 -1.54 13.1

Other primary products

-48 -12 -0.15 0.48

Processed food -776 1,888 -0.22 7.50

Fishery Issues in Japan

• Quantitative restrictions of imports of: herring, cod, yellowtail, mackerel, sardine, horse mackerel, and saury to protect domestic inshore fishing

• Japan is only the country in the world to impose IQ on fishery products.

• It is not only a trade issue but also a matter of the management of common natural resources

<Resistance against JK-FTA>In Japan: agriculture > fishery (?)

In Korea: agriculture < fishery (?)

<Searching Possible Solution>• Policy shift to decoupled direct payment• Promoting intra-industry trade• Cooperation for common fishery resource management• Establishing “common agricultural policy”

THANK YOU!