DONALD Trump’s impulsive decision to quit the 11-country trans-Pacific free trade agreement is going to cost American beef producers big time.
University of Tennessee Institute of Agriculture (UTIA) projections indicate that beef-exporting countries in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) will benefit from an immediate reduction and phase-down of tariffs from their current levels over a 15-year period.
Beef-exporting countries in the trade agreement, such as Australia, New Zealand, Mexico and Canada, will see significant Japanese tariff reductions on beef, dropping from 38.5 per cent to nine per cent for muscle cuts, with tariffs on offal products phased out completely.
US beef will continue to face Japanese tariffs of 38.5 per cent to 50 per cent, as well as a global safeguard tariff of 50 per cent, in the leading market for US beef exports that accounts for more than 25 per cent of global shipments worth US$7.3 billion (£5.6 billion) last year.
The Tennessee researchers say the tariff reductions appear to most benefit Australian beef. The projection suggests Australian shipments could increase by as much as US$139 million (£106 million) a year, while US beef revenue falls by US$143 million (£109.1 million).
Canada, Mexico and New Zealand are projected to increase their beef sales to Japan by US$4 million (£3.05 million).
If the US also received tariff reductions, through a bilateral agreement for instance, the total benefit is US$287 million (£219 million) – avoided export loss of US$70 million (£53.4 million) and export gain of US$217 million (£165.6 million).
“As exporting countries, other than the U.S., aggressively pursue free trade agreements, U.S. agricultural sectors such as beef could be disadvantaged, if we stay out of the FTA game,” says UTIA trade expert Andrew Muhammad.
“Overall, the report highlights why it is important for the U.S. to stay engaged in international trade negotiations to maintain its competitive edge in global markets.”
At the farm level, higher tariffs will negatively impact returns to every segment of the industry, from cow-calf producers to packers.
“Alternatively, if the U.S. is able to establish a trade agreement with Japan that is identical to competing countries, then returns at the farm level should be influenced positively,” Muhammad says.