Business / Economy

TPP giving sheltered farmers greater incentive to export pricey produce

by Kaori Kaneko

Reuters

Japan’s high-cost farmers, sheltered by prohibitive import tariffs, might appear to be most at risk from the giant trans-Pacific trade deal agreed upon last month, but they are instead making an unlikely push to export more of their pricey produce.

The latest figures show that the agriculture sector exports only about 5 percent of its output, but Prime Minister Shinzo Abe sees the Trans-Pacific Partnership, a free trade deal reached in Atlanta on Oct. 5, as an opportunity, not a threat.

“We should challenge with courage. It is time to make innovation happen and take the step into the open world,” he said after 12 nations including Japan and the United States concluded the TPP, which covers about 40 percent of the global economy and aims, in principle, to eliminate all tariffs and quotas.

It will take more than courage to persuade the world to fork out for the country’s high-cost farm goods — its producer price for rice, for example, is about eight times the American equivalent, according to the U.S. Department of Agriculture, and reforms will be required to boost efficiency.

“The quality of Japan’s agriculture products (is) high but they are expensive, which is the biggest obstacle for expanding the (export) sales channel,” said Nobuhiro Suzuki, professor of global agricultural sciences at the University of Tokyo.

But the farmers have a compelling incentive.

“The domestic market is saturated,” said third-generation fruit farmer Soichi Furuya, who started exporting grapes and peaches to Hong Kong and Taiwan, which are not in the TPP, a decade ago.

He said most of his business will remain domestic, but that Japan’s shrinking population made export markets attractive and the nation’s high-quality produce was capable of cracking them.

“I think the excellence of Japanese fruits still has not been fully recognized in the world,” said Furuya, 42, standing under vines of sweet red Kaiji grapes in Yamanashi Prefecture, the heart of the fruit industry.

One place where they do enjoy that recognition is in Hong Kong, Japan’s biggest market for farm produce.

“Some of them definitely deserve the high price,” said mother of two Rita Lo while on one of her regular three shopping outings a week at a Japanese supermarket in Taikoo, Hong Kong, where 500 grams of Japanese grapes were selling for 199 Hong Kong dollars ($25.68), opposite to their American equivalents at just HK$37 ($4.77).

Lo said she spends about HK$200 per visit because the Japanese goods are “tastier, look better and of higher quality” and would buy more if they were cheaper.

For Furuya, the chief obstacle to cutting prices is not overseas tariffs — Hong Kong imposes none on his fruit — but quarantine issues and delivery costs for his fragile cargo.

“It will be great if transportation technology develops further and infrastructure for exporting improves,” he said.

Industry insiders say transport costs can add 50 percent or more to the price of grapes, and around 10 percent for beef. Beef and fruit are among Japan’s main food exports.

Some companies such as the logistics units of ANA Holdings Inc and Yamato Holdings Co. are already trying to address these issues.

Katsuhiko Umetsu, head of Yamato Transport’s global business development division, said better delivery options are key to increasing overseas demand for Japanese produce.

“What we decided was to offer a service to farm producers so they can export their products in small lots,” he said.

By consolidating small lots from all over Japan to a 24-hour airport in Okinawa, the nation’s farm products can be delivered to neighboring parts of Asia the following day.

Abe’s government is aiming to raise the nation’s farm, fishery and forestry exports to ¥1 trillion ($8.4 billion) by 2020. Last year, they hit a record high of ¥612 billion, up 11 percent from 2013.