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EU-Japan trade deal worrisome for U.S. farm exports

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U.S. cheese exports stand to suffer from a trade deal struck between Japan and the European Union, but beef is also likely to be impacted indirectly.

A recent trade deal between the European Union and Japan will have mixed impacts for American farm exports but is part of a discouraging trend, experts say.

Some European products, such as cheese, are more likely to win market share in Japan from U.S. producers than others, such as wheat, according to trade specialists from several agricultural organizations.

Overall, though, the agreement is another example of foreign countries improving their trade relationships while the U.S. is left behind, they said.

“If our competitors have a much lower tariff rate, that’s not a level playing field,” said Kent Bacus, international trade director for the National Cattlemen’s Beef Association.

Tariffs will be eliminated in Japan over 15 years for certain EU cheeses — including cheddar, parmesan and gouda — while volume limits will be raised and eventually eliminated for other cheeses, such as mozzarella, brie and feta, according to a USDA analysis.

“Europeans are going to take us to the cleaners if we do not catch up and catch up soon,” said Jaime Castaneda, senior vice president of trade policy for the U.S. Dairy Export Council.

U.S. dairy product exports to Japan most recently peaked in 2014, with more than $400 million worth of goods shipped, but fell to about $200 million last year, according to USDA.

It will be extremely difficult for U.S. producers to compete in Japan if they’re saddled with tariffs of up to 40 percent on some cheeses while the Europeans pay progressively lower rates and ultimately none, Castaneda said.

“It is a concern for the long term,” he said. “They will gradually establish relationships with Europe and we will actually suffer.”

The impacts on U.S. beef exports to Japan — which have fluctuated between $1 billion and $1.5 billion in recent years — will be more indirect but also concerning.

Under the deal between Japan and Europe, tariffs on European beef will be lowered from 38.5 percent to 9 percent over 15 years, while tariffs on European pork will be drastically reduced over 10 years, with specific rates depending on the cut, according to USDA’s analysis.

Europe isn’t positioned to export significantly larger amounts of beef to Japan, but its pork exports are a real threat to U.S. competitors, said Bacus.

That’s bad news for U.S. beef producers as well, since cheaper European pork will likely increase consumption of that meat in Japan, he said.

If less U.S. pork is shipped to Japan, it will also increase pork inventories in the U.S., driving down domestic pork prices to the detriment of beef, he said.

“Consumers around the world look at price,” Bacus said.

More broadly, it’s frustrating to see terms hammered out under the Trans-Pacific Partnership — a major trade deal involving 12 nations — being extended to Europe now that the U.S. has pulled out of the agreement, he said.

For example, the tariff decrease on beef from 38.5 percent to 9 percent was a major win for U.S. producers during the negotiations, Bacus said.

“Everything we fought for in TPP is now being given to our competitors,” he said.

Wheat is another major U.S. farm export to Japan, though the value of shipments has dropped from about $1 billion to more than $600 million over the past five years.

Northwest farmers export soft white wheat to Japan, which isn’t likely to be affected by the European Union agreement, said Blake Rowe, CEO of the Oregon Wheat Commission.

“The EU doesn’t really produce a substitute,” he said.

Germany produces a high protein spring wheat that could conceivably compete with U.S. hard red spring wheat, but the transportation costs would probably be much higher, said Steve Mercer, vice president of communications for U.S. Wheat Associates, a group focused on exports.

Nonetheless, the trade deal Japan struck with Europe is indicative of the U.S. lagging “as other countries that are or are potentially competitors are actively negotiating bilateral and multilateral trade agreements,” Mercer said in an email.

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