US food producers brace for hit as Pacific trade deal goes into effect
- Seven countries — Australia, Canada, Japan, Mexico, New Zealand, Singapore and Vietnam — ratified the Comprehensive and Progressive Agreement for Trans-Pacific Partnership on Dec. 30, according to CNBC. The remaining four — Brunei, Chile, Malaysia and Peru — are expected to ratify the CPTPP soon.
- The trade deal, which President Donald Trump pulled the U.S. out of early last year, is expected to benefit member counties by cutting tariffs among them and boosting the cost of goods from non-members. CNBC reported that U.S. beef and wheat exports could especially feel the pain from this deal.
- U.S. food and beverage products such as Welch's grape juice, Tyson's pork and California almonds would be subject to tariffs in Japan, but competitors' products from CPTPP countries will eventually be duty-free, according to CNN. In addition, Australia could export more beef to Japan than the U.S. because their foreign beef tariffs would be 27.5% cheaper, CNBC reported.
The CPTPP's implementation is expected to put pressure on U.S. products and commodity producers. It could also pressure the Trump administration into reversing its decision to withdraw from the pact as price differences squeeze U.S. food exports to participating members.
Grain farmers and meat and dairy producers who are already suffering from the administration's tariff wars — including trade delays with China and waiting on the United States-Mexico-Canada trade agreement — are likely to again bear the brunt as the CPTPP takes effect.
"The U.S. beef industry is at risk of losing significant market share in Japan unless immediate action is taken to level the playing field," Kevin Kester, president of the National Cattlemen's Beef Association, said in a statement last month. Besides the lower foreign beef tariffs for CPTPP member countries in the first year, those export tariffs could fall to 9% during the next 15 years, he warned.
That's a stark contrast from predictions made about the original Trans-Pacific Partnership, the name the trade deal went by before the U.S. pulled out. According to a study from the American Farm Bureau Federation, U.S. beef and pork exports were projected to jump by almost $2 billion at full TPP implementation in 2026, and net trade was projected to rise for rice, cotton, beef, pork, poultry, butter, cheese and non-fat dry milk.
Under the CPTPP, U.S. wheat farmers will also face a distinct price disadvantage for their exports to Japan, while Canadian and Australian wheat will enjoy an immediate 7% drop and a 12% decline in April, CNBC noted. U.S. Wheat Associates President Vince Peterson said at that point, U.S. wheat would see a $14 price disadvantage per metric ton compared to those two other countries.
"Japan is generally a market where we seek to maintain our strong 53% market share, but today we face an imminent collapse," Peterson said Dec. 10 at a public hearing in Washington, D.C.
Any U.S. food and beverage manufacturers that exports to CPTPP member countries could also take a hit from this new Pacific trade agreement. And the economic damage isn't likely to stop there because Japan has negotiated a trade deal with the European Union scheduled to go into effect on Feb. 1. The BBC reported that the EU-Japan Economic Partnership Agreement will establish an open trade zone with a market exceeding 600 million people, representing almost one-third of the world's GDP.
Although the U.S. isn't a party to that agreement either, Trump has indicated interest in negotiating a bilateral trade deal with Japan with talks scheduled as early as the middle of this month, the Japan Times said. If that effort doesn't pan out or doesn't go into effect soon enough, the administration may need to step in and help bail out certain agricultural sectors as it did last summer with $12 billion in short-term emergency funds for farmers hurt by tariffs. But a more effective long-term strategy might be for the U.S. to negotiate trade deals along the way instead of playing an expensive game of catch-up later.