Japan trade agreement a source of dairy ‘hope’
WASHINGTON — The USDA reports show that Japan is our No. 5 overseas market for dairy products.
Sales of dairy products to Japan had already benefited from the U.S.-Japan Trade Agreement before the coronavirus interrupted world trade. Since the trade pact at the first of this year, Japanese tariffs on hard cheeses, such as cheddar, fell by close to four percent from 29.8 percent. In addition, record sales of non-fat dry milk and skim milk powder to Japan were reported for the first month of 2020.
Tony Rice, trade policy coordinator for the National Milk Producers Federation, observes, “Although the outbreak of the novel coronavirus has caused significant disruptions in global supply chains, the U.S.-Japan Phase One trade agreement that went into effect January 1, 2020 provides American dairy producers with some hope for the future. Japan is already one of our top five overseas markets for U.S. dairy products and consumer demand continues to grow. Over the coming years, domestic Japanese dairy production will be insufficient to meet demand, providing an opportunity for U.S. producers to fill that void. A 2019 U.S. Dairy Export Council study found that if the U.S. has at least the same market access as its competitors, the U.S. could roughly double its share of the Japanese market over the next 10 years.”
Japan is the second largest importer of cheese globally, and the U.S. is a major supplier. But steep tariffs on cheese in particular and the uneven playing field with competitors have harmed U.S. exports of cheese in the past. In 2018 Japan imported about $156 million of U.S. cheese. It represented about 54 percent of Japan’s U.S. dairy imports. Total whey products were about $71 million in 2018. Whey tariffs are slated to be phased out to zero by 2023.
When the trade agreement is fully implemented, nearly 90 percent of U.S. food and agricultural products imported into Japan will be duty free or receive preferential access.
Japan’s population is declining, However, the increasing rate of consumption is outpacing its depopulation. Japan’s domestic cheese production, for example is decreasing. Forecasts denote Japan’s rising demand for whey and lactose as well.
USDA figures indicate the magnitude of yogurt and non-whey dairy components and their duties. In 2019 we exported $75 million of lactose, milk albumin and other dairy components. The U.S. accounted for 16 percent of Japan’s total imports of these products.
Lactose and lactose syrup had a base tariff rate of 8.5 percent, and sales of almost $39 million. Milk albumin’s rate had been 2.9 percent, and the 2019 sales were almost $38 million. Those rates are now free.
The U.S. supplied 42 and 30 percent respectively of Japan’s total imports of lactose and milk albumin last year. Those products are attractive to Japanese buyers because they can be imported outside of Japan’s government-operated dairy quota system. Lactose is a key ingredient in seasonings, confectionery and dairy drinks. Whey protein concentrate of over 80 percent content and whey protein isolate are imported as milk albumin.
The products consisting of natural milk used for infant formula with no added sugar and with varying fat contents base rate was 29.8 percent. These products, however, have specific quotas, but those also will be reduced in stages. The imports in 2019 amounted to $1.5 million.
The tariffs for dairy products with over 30 percent of natural milk and less than 30 percent fat’s base rate was 21 percent. These tariffs will be reduced in stages, to reach 5.2 percent in 2023. The 2019 value was $80 thousand.
Frozen yogurt with sugar was 26.3 percent base rate, and at the 2021 stage will be 16.7 percent, and free by 2028. Other frozen yogurts were similar, with a 29.8 percent base rate, and 18.9 percent in 2021, and free of tariffs by 2028.
Rice comments further, “The Phase One agreement made significant strides toward mitigating some of the disadvantages the U.S. dairy producers have had compared to the European Union and countries part of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) agreement, including New Zealand and Australia. While there are important gains to be made in a comprehensive Phase Two deal to further close gaps in market access, the Phase One deal is a critical step in the right direction toward providing opportunities for American dairy producers to secure long-term market access, particularly for U.S. cheese, whey products and lactose exports.”
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