Commentary / Japan | SENTAKU MAGAZINE

The false promises of farm exports as a growth strategy

A large-scale trade fair was held at the Makuhari Messe convention center in Chiba for three days from Oct. 11 to promote the export of Japanese agricultural products. Targeting buyers from abroad, the fair, the first of its kind in this country, was co-sponsored by the Japan External Trade Organization (JETRO) with the cooperation of the Agriculture, Forestry and Fisheries Ministry. Although about 300 Japanese firms put their products on display, reactions from the overseas buyers was not altogether favorable. An Italian buyer said Japanese strawberries he tasted were too sweet and soft.

Farm minister Ken Saito criticizes the lack of efforts on the part of Japanese farm organizations to sell their products abroad. Saito, a former career bureaucrat of the trade ministry, is aware of the history of how Japanese manufacturers took pains cultivating overseas markets for their products, and urges officials of agricultural cooperatives to go visit other countries themselves if they want to sell their products abroad. Buyers from abroad, however, know how it is difficult to export Japanese agriculture goods.

In 2016, Japan’s export of agricultural products hit a record ¥750.2 billion, up 0.7 percent from the previous year for the fourth year-on-year increase in a row. Such figures may give an impression that Prime Minister Shinzo Abe’s goal of boosting farm product export to ¥1 trillion by 2019 may be within reach. These figures, however, are in fact padded up because they include pearls, tobacco and alcoholic beverages, with agricultural products in a pure sense of the term accounting for a shade more than ¥200 billion.

Moreover, Japan imports nearly all of the raw materials needed for the output of processed foodstuff — including tobacco leaves, wheat for making whisky, beer, noodles and cakes, as well as feed for cattle and other livestock. The Abe administration says it will promote agricultural exports to make Japan’s farming more competitive. But that rhetoric fails to take this trade structure into account. If the government is serious about promoting farm exports, it should calculate the “net” export figure by subtracting the raw material imports.

In addition, many people are led to believe that increased agriculture exports would serve to raise farmers’ incomes. Luxury export items like wagyu from Japanese breeds of cattle, large-size melons and cubic-shaped watermelons are too expensive to sell in large volumes. Farmers need to discard substandard products to keep up the brand quality of such products, and such costs and risks threaten to bring down their profit margin.

The weakness of Japanese farm exports not just lie in their price competitiveness. The quality of the products is being questioned, partly because of criticism, mainly in European countries, that Japan is not paying enough attention to environmental protection in its farming as large amounts of agricultural chemicals and chemical fertilizers are being used and fossil fuels are burned to heat greenhouses.

According to 2010 OECD statistics, Japan was second among OECD members — after South Korea — in the amount of agricultural chemicals used per square kilometer of farmland. The amount used in Japan — at 1.16 tons — is far larger than the 0.55 ton of Italy, ranked third, and the OECD average of 0.07 tons. China, which does not belong to the OECD, is believed to use a larger amount of farm chemicals than South Korea. Concerns over the environment have grown so much that weather conditions peculiar to Asia — which requires the use of such chemicals for pest control — are no longer accepted as an excuse. Indeed, the Netherlands, which was using more pesticides than Japan or South Korea in the 1990s, has significantly reduced the use of such chemicals amid the rising awareness of environmental issues.

Japan also lags behind others in quality control efforts in terms of agricultural products. Only with the approach of the 2020 Tokyo Olympic Games has Japan started paying attention to Good Agricultural Practices, an internationally influential farm certification scheme for sustainable production process management — which is considered a must in exporting farm products. There is a joke that the reason the scheme does not become widespread in Japan because it would expose the massive use of agricultural chemicals by Japanese farmers.

Even more problematic is that the farm export strategy doesn’t take the nation’s food security into consideration. A strategy for promoting the export of farm products is usually targeted to either earning foreign currencies or ensuring food security.

The first target is followed mainly by developing countries with competitive agriculture sectors, which export such products as bananas, coffee beans, palm oil and others from their plantations. Japan in the past belonged to this category when silk and tea were among its principal exports. A downside of this pattern is that excessive exports could drive up domestic prices, potentially harming the country’s consumers.

Many industrialized countries, on the other hand, pursue the strategy as part of their efforts to sustain domestic agricultural production. On the belief that farming is indispensable for maintaining land and securing food supply, those countries export their foodstuffs to deal with excess production of strategic commodities essential to their national security. Falling into this categories are U.S. exports of corns and soybeans, Russian wheat and barley, and European meat and cheeses.

Since the 1990s, exporting countries shifted their strategies to a so-called hybrid type, selling higher value-added products like beef, pork and ethanol, rather than grains. In line with this shift, giant farm product traders like Cargill Inc. of the United States is pursuing a vertical integration of their operations by buying up food processing companies. In international trade talks, livestock and dairy products often become focal points of discussion because they are directly related to the food security of the countries involved.

Japan’s export of farm products lacks a food security strategy. The biggest mistake in this regard is its export of beef. The Japanese livestock farming is effectively a processing industry that relies heavily on imported feed. Trading houses and shipping businesses may profit from transactions involving feed imports and beef exports, but what those transactions leaves on Japanese soil may just be excrementitious matters from the cattle. A halt to grain imports from the U.S. for any reason would spell a total disaster for Japan’s livestock industry. Indeed, in the 1970s, the oil crisis and the resultant spike in soybean prices played havoc with stockbreeders in western Japan. In short, promoting beef exports would only result in a greater reliance on the U.S.

From the food security standpoint, Japan’s strategy of farm product exports should focus on rice, a staple food that is in oversupply. Rice can be processed into sake, cookies and a variety of other products, and its increased export can help conserve irrigated rice fields in this country. Unfortunately, however, rice exports in 2016 amounted to a mere ¥2.7 billion, even though this figure represented a 21.2 percent increase from the previous year. Instead of Abe’s slogan of boosting farm product exports to ¥1 trillion, the government should set a more realistic target of increasing rice exports to ¥10 billion.

This is an abridged translation of an article from the November issue of Sentaku, a monthly magazine covering political, social and economic scenes. More English articles can be read at www.sentaku-en.com