Japan’s Agriculture and TPP

Recently, the US government complained that Japan doesn’t open access to its agriculture market and therefore blocks progress of the TPP. To analyze Japan’s motivation of protecting its agricultural products, first we have to know something about the TPP.

屏幕快照 2014-04-09 上午9.35.13

TPP is a trade agreement among 12 countries on the Pacific Rim to manage trade, enhance the investment and integrate the economies. Japan acted as an observer in the TPP in November 2010 and expresses its intention to join the TPP.

However, due to the disagreements on Japan’s provisions of agriculture between Japan and US, the process of Japan moving forward in the TPP is suspended. Japan wants to keep the tariffs on several agricultural products such as rice and beef while US will export lots of beef and rice to Japan if Japan joins the TPP.

The reason why Japan wants to protect its agriculture is a long history. It is well known that most industries in Japan are well developed and famous in the world. For example, the auto industry constitutes a major part in the world market. However, for agriculture, it’s different. Japan’s agriculture used to strong in the past. But due to the wrong agricultural policy, the development declined a lot. Government policy has discouraged farmers from taking advantage of economies of scale. Besides that, farms are not willing to lend their land out because of tenant rights protected by the law, which causes that production costs could not be lowered. Therefore, nowadays, most farms are seeking protection from international competition and receiving subsidies from government.

If Japan could not participate well in TPP due to agriculture factor, what would be the effect? First, Japan’s exports to other countries especially would have a disadvantage because of higher tariffs and quotas, which reduces Japan’s net export. Second, the consumers in Japan have to spend more money on imported goods because Japan would also enforce a higher tariff. As a result, consumer surplus would decrease, which leads to compliant of Japanese people. Additionally, Japan’s agriculture would always maintain its week role because of no competition, being harmful in the long term.

Obviously, if Japan wants to act more well in TPP and accelerate the development of international trade, it should do some change in its agriculture.

First, though there is a lot of political pressure to change the agricultural policy, Japanese government can still use the income support system for individual farmers to ease the pressure. Second, government should insert more capital into agriculture since agriculture is really a small industry in Japan. In that way, even if the agricultural products price decline because of fierce competition in TPP, the farmers can still get profits with the help from government’s subsidies. Last but not least, it is important to point out that consumers in Japan will benefit from the international trade of TPP even if the farmers suffer losses in the trade. Therefore, as a whole, the social welfare is not declining.

To sum up, to have a positive role for Japan in the TPP, the government should make changes on its agriculture industry and seek the solution to address the problems with other countries together.

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