WASHINGTON – The United States has agreed to allow Japan to retain tariffs on rice and wheat, government sources said Thursday during bilateral talks related to the wider Pacific free trade negotiations.
In return, Washington demanded Tokyo introduce a system to increase U.S. rice imports, which the Japanese side agreed to do, the sources said.
Among the five “sacred” farm product categories Japan regards off-limits — rice, wheat, beef and pork, dairy products and sugar — products such as sugar cane are also likely to be exempted from the basic principle of abolishing all tariffs under the Trans-Pacific Partnership framework, since both Tokyo and Washington want to protect them, the sources said.
According to the sources, talks on dairy products have also made some headway.
Whether Japan and the U.S. can reach a broad agreement before an April 24 summit between Prime Minister Shinzo Abe and U.S. President Barack Obama in Tokyo now depends on how much progress the two sides can make on beef and pork.
In line with a World Trade Organization deal that obliges Japan to provide minimum market access opportunities, Tokyo annually imports 770,000 tons of rice under tariff-free state trading. But it imposes a 778 percent tariff on rice imported outside the minimum access framework.
Amid the TPP negotiations, the two sides are working to set up a special quota that would allow the U.S. to export more rice to Japan under private trading, the sources said.
As for wheat, Japan will likely drastically reduce the import markup — the margin levied on exporters under state trading — on U.S. wheat from the current maximum of ¥45.2 per kilogram, they said.
The U.S. initially wanted Japan to halt state trading of rice and wheat, and abolish tariffs. But Washington dropped the demand because that would also lead to an increase of rice and wheat exports to Japan from Canada and Australia, which compete with the U.S., they said.
The TPP negotiations involve Japan, Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam.
U.S. biz group weighs in
The U.S. Chamber of Commerce voiced hope Wednesday that Japan and the United States will be able to make a breakthrough in the deadlock preventing the signing of a wider Pacific free trade deal by next week’s summit in Tokyo.
Tami Overby, the chamber’s vice president for Asia, said she does not expect to see a “complete” Trans-Pacific Partnership deal by the time U.S. President Barack Obama and Prime Minister Shinzo Abe meet.
“I think what we will have is a breakthrough,” Overby said. “It is my fervent hope that President Obama and Prime Minister Abe will not miss this opportunity now.”
Japan and the U.S. have held a series of high-level meetings since last week to bridge the gaps — mainly over the issue of market access including Japan’s tariffs on agricultural produce in the U.S.-led 12-country initiative.
Overby made the comments before Akira Amari, the minister in charge of the TPP talks, arrived in Washington on Wednesday for a fresh round of talks with Michael Froman, the U.S. trade representative.
Overby suggested it is understandable that Japan wants to keep tariffs on five agricultural product categories as exceptions under the envisioned TPP, saying: “There is no perfect trade deal. There is no deal that has every product covered that goes to zero.”
If the U.S. and Japan are able to strike a deal on the current sticking points, “a bunch of other things will start the dominoes’ fall” in subsequent TPP negotiations, Overby said.
The U.S., Japan and the 10 other countries are struggling to conclude a TPP accord after missing their primary deadline at the end of last year.