Rice: At the Heart of Japan and its Trade Disputes

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Figure 1: Rice Planting in Oita, Japan                                                                                            (Source: Sethuram Shyamala, 2012)

Rice in Japan costs twice as much as in the rest of the world.  To protect local rice farmers, Japan imposes a whopping 777.7% tariff on imported polished rice.  In the 1990s, US farmers complained that they had to see more Japanese electronic imports and automobiles while they could not sell their rice in Japan.  Two decades later, the complaints are still the same, but will the TPP bring change?

Japan’s low rice productivity is the result of the lack of economies of scale and the ‘gentan’ system in place.  Another issue is that the majority of farmers are either elderly or part-time farmers (often farming for just 30 days each year) using outdated equipment.  98% of Japanese farms are smaller than five hectares, with few fields.  Throughout history, Japan has generally had a surplus of rice production.  From 1971, the ‘gentan’ system was established whereby the Japanese government paid farmers to reduce rice production.  This was done for the benefit of small-scale farmers, to prevent a fall in the market price of rice.  As a result, in 2010, one third of Japan’s paddy fields did not grow rice.  However, many farmers collected government compensation for ‘loss incurred’ from reduced rice production without producing anything at all.

Rice farming is more than just a livelihood; it’s a symbol of Japan’s cultural heritage.  For Prime Minister Shinzo Abe, it is even more than that.  It is a politically sensitive issue, since much of the Liberal Democratic Party’s support comes from farmers and the Japan Agricultural Cooperatives (JA).  Yet, on 26 November 2013, he announced that ‘gentan’ would be abolished gradually by 2018.  The aim was to increase rice productivity so that Japan could eventually compete with the world.  In order to take advantage of economies of scale, the plan is to consolidate small-scale owners’ local farms and lease them out in bulk area to companies.  This would eventually halve the price of rice from about ¥16000 to ¥8000 for a 60kg sack.  Thus, the rice market could eventually be opened up.  However, the system remains flawed as ‘gentan’ continues to apply to mountainous paddy fields, as it is unclear exactly where these regions are.

Among the TPP members, the US and Vietnam are top rice exporters to benefit from tariff reductions.  Malaysia, Singapore, and Japan are potential markets they hope to export into.  Historically, Japan has taken a firm, protectionist stance on farm trade, and any negotiations have proven difficult.  Even as Japan joins the TPP, farm trade negotiations are tense.  The argument is that since Japanese auto manufacturers will enjoy lower tariffs, farm imports into Japan should enjoy the same benefits.  An additional factor to consider is whether the Japanese would prefer foreign rice imports.  For example, the sticky rice produced in Japan is very different from the fluffy rice produced in the US.  Is it likely that the US will produce more sticky rice?

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Figure 2: Children Planting Rice in Oita, Japan                                                                    (Source: Sethuram Shyamala, 2012)

Rice or ‘gohan’ has historically been the staple food.  In fact, the Japanese words for breakfast, lunch, and dinner are ‘asa-gohan’, ‘hiru-gohan’, and ‘ban-gohan’.  Until the Edo period when currency was introduced, rice was the medium of exchange – the Samurai were paid in rice.  In folklore and festivals, rice symbolized bounty or rewards for good deeds.

Rice cultivation has shaped modern-day Japanese culture.  Historically, small-scale farming neighbors relied on one another, sharing labor, irrigation and other limited resources for rice cultivation.  This meant that they had to cooperate, often for several generations.  Group harmony was of utmost importance, and still is in modern-day Japanese society and corporations.  Whether garbage separation or energy conservation after the Fukushima disaster, community initiatives are taken seriously.  In interior regions, many houses still don’t have locks for the front door, trusting in the community.

Today, the number of rice farmers in Japan has drastically declined.  Yet, even for those living in crowded Tokyo localities, rice brings back memories of ‘furusato’ or the ‘hometown’.  Every year, the Emperor blesses the rice crop.  Parents often take children to the countryside to plant rice and experience the rice culture.

Prime Minister Abe’s reforms may successfully increase Japan’s long-run rice productivity.  However, the immediate pressure from the TPP is a threat to the livelihood of Japan’s rice farmers, and a threat to the very core of Japan’s cultural heritage.  In recent negotiations, Mr. Abe seems willing to sacrifice the entire tariffs on beef (38.5%) and wheat (252%) in the fight to protect rice, sugar, and dairy products.  Japan is the world’s third largest agricultural importer (after the US and EU), importing over $60 billion in 2012.  Approximately 60% of food consumption is imported.  Shinichi Shogenji, Agricultural Science Professor at Nagoya University, argues that rice and dairy must be protected to maintain Japan’s food security.

Table 1:

Agriculture – Simple Average Bound and MFN Applied Tariffs for 2011

Country

Bound

MFN Applied

Australia

3.5

1.4

United States

4.9

5

New Zealand

6

1.4

European Union

13.8

13.9

Chinese Taipei

17.5

16.6

Canada

18

18

Japan

22.8

23.3

Republic of Korea

56.1

48.6

Source: WTO Tariff Profiles 2012

References:

Atlas, T.  (September 15, 1988).  US Rice Farmers Open Fire on Japanese Barriers.  In Chicago Tribune.  Retrieved March 7, 2014, from  http://articles.chicagotribune.com/1988-09-15/business/8801300683_1_american-rice-growers-japan-barriers-american-grown-rice

Bloomberg (n.d.).  Beef, Wheat May Be Sacrificed in Talks.  In The Japan Times.  Retrieved March 8, 2014, from  http://www.japantimes.co.jp/news/2013/03/16/business/beef-wheat-may-be-sacrificed-in-talks/#.UxuBioVFD4Y

Durand-Morat, A & Wailes, E. The Trans-Pacific Partnership and Its Potential Impact on the Rice Market: Implications for Japan and the Partners.  Retrieved March 8, 2014, from http://worldfood.apionet.or.jp/2_wailes.pdf

Tabuchi, H. (January 9, 2014).  Japan Begins to Question Protection Given to Homegrown Rice.  In The New York Times.  Retrieved March 5, 2014, from http://www.nytimes.com/2014/01/10/business/international/japanese-begin-to-question-rices-sacred-place.html?_r=0

The Economist (November 30, 2013).  The Government Abolishes Previously Sacrosanct Agricultural Subsidies. In Rice Farming in Japan Political Staple.  Retrieved March 7, 2014, from http://www.economist.com/news/finance-and-economics/21590947-government-abolishes-previously-sacrosanct-agricultural-subsidies-political

Wojtan, L.  (November, 1993).  Rice: It’s More Than Just Food in Japan.  In Stanford Program on International and Cross-Cultural Education.  Retrieved March 7, 2014, from http://spice.stanford.edu/docs/145

WTO, ITC, UNCTAD (2012).  World Tariff Profile 2012.  Retrieved March 8, 2014, from http://www.wto.org/english/res_e/booksp_e/tariff_profiles12_e.pdf

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