Potential Impacts of an Exclusionary Trans-Pacific Partnership Agreement on Agriculture in the US and Japan

Abstract

The Trans-Pacific Partnership (TPP) is a free trade agreement that hopes to eliminate all tariff and non-tariff trade barriers between 12 participating countries. Japan, the fourth-largest trading partner for the United States, is a significant player in the negotiations. Due to cultural and historical significance it is expected that Japan will ask for exclusions on agricultural products, limiting the overall effectiveness of a fully liberalised agreement. Using a computable general equilibrium modelling framework across varying scenarios, we show the difference between the full liberalisation and potential exclusionary scenarios. Estimates show that a 25 per cent reduction in import tariffs on agricultural commodities in Japan results in a difference of net welfare benefits equal to –USD 7 billion, emphasising the importance of these concessions.

JEL Classification: F14, F15, Q17

Keywords

International Trade Japan TPP GTAP Agriculture CGE

1. INTRODUCTION

Japan is currently a member of 13 free trade agreements (FTA) and economic partnership agreements (EPA), and is in negotiations for 10 more (Ministry of Foreign Affairs, 2013). This openness coincides with Japan’s overall domestic policy directions and will help to increase economic development. However, despite the large number of FTAs meant to foster open trade, Japan’s FTA coverage ratio (the percentage of trade that is traded under an FTA) is only 18.6 per cent of products traded. This coverage ratio is much lower than many of Japan’s other trading partners such as the US (38.8 per cent) or South Korea (34.4 per cent) (Naoi & Urata, 2013). This is largely a result of exclusionary products and sectors that have been kept out of the FTA negotiations owing to their sensitive nature. Agriculture is the most protected sector due to its multi-functionality in Japanese culture, and remains highly protected even amongst open trading partners. These protection measures will be called into question throughout the negotiations for the Trans-Pacific Partnership (TPP) agreement whose main intent is to eliminate all barriers to trade (Hisano, 2013) among the 12 trading partners included in the negotiations.

This research article employs a computable general equilibrium (CGE) modelling framework to understand the economic implications of Japan adopting a limited market access reform package as part of a potential TPP agreement. Specifically, this work compares a fully liberalised TPP agreement with potential agreements that include varying levels of limited concessions from Japan on agriculture. The restricted TPP scenario excludes the most protected agricultural products from the de-tariffication process, to analyse the implications on trade for the other TPP-partnering countries, with emphasis on agricultural trade between the US and Japan. The implications of these exclusions are significant reductions of potential exports by trading partners once the TPP is implemented when compared to a fully liberalised TPP agreement on agriculture.

One of the most important aims of the TPP is to foster improved Asia-Pacific relations by creating open trade positions between the member countries. As a twenty-first century FTA, the intention is to eliminate all trade barriers, both tariff and non-tariff, between member countries which include: Australia, Brunei, Chile, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam. Many of these countries have agreements between select member states, such as the North American Free Trade Agreement (NAFTA) or the Association of Southeast Asian Nations (ASEAN), but the conditions are not as rigorous and the participation is not as broad as is proposed under the TPP. Japan is the third largest world economy and does not have an FTA with the US, despite being the fourth largest US trading partner. The potential implications of an agreement between these two countries are significant (Williams, 2013). Our estimations of the impacts on trade from the US to Japan vary depending on the concession level, with the 25 per cent scenario resulting in a USD 1.9 billion (USD = US dollars) loss compared to the fully liberalised scenario.

2. PREVIOUS STUDIES

Historically, Japan’s participation in FTAs and EPAs has been driven by positive political repositioning and a protectionist agenda (Naoi & Urata, 2013). As stated above, the 18.6 per cent FTA coverage ratio underpins the nature of Japan’s FTAs. Protectionist policies have historically been used as a means of bolstering domestic production. Specifically, agriculture has remained a highly protected sector. This stems from both a food policy perspective and a cultural standpoint within Japan. Agriculture, as a part of the country’s cultural heritage and as a major livelihood, has been a long-standing motivation for protectionist ideals. Japan has also traditionally strived for self-sufficiency in agriculture. This multi-functionality of agriculture has led to its exclusion from trade discussions. When concessions on agricultural trade have been made by Japan, they have been limited in value as well as in depth of coverage. The most trade-protected agricultural products include rice, wheat, barley, powdered skim milk, butter, pork and beef (Naoi & Urata, 2013). For example, rice has been protected by a 778 per cent tariff on imports (Stokes, 2012). These protectionist policies will be questioned as part of the TPP negotiations. Due to the potential loss in surplus for agricultural producers in Japan, there have been increased media campaigns paid for by agricultural interest groups to discourage Japan’s commitment to the terms of the TPP. This has given rise to increased pressure on the Japanese delegation to request for specific products and sectors to be excluded from tariff reform under the TPP.

While these exclusions are contentious points politically in Japan, there are other groups that have argued for the necessity for Japan to join and help finalise the TPP. For example, the agreement could help to secure export markets for Japan. Export manufacturing is the largest sector that may benefit from this agreement, and industry is in support of Japan’s participation (Cooper, 2013). For example, vehicles account for 36 per cent of Japanese exports to the US (Chiang, 2013). Also, the US–South Korea FTA (KORUS) has increased South Korea’s presence in the US market (Williams, 2013) affirming the fear of Japan’s manufacturing industry that it is imperative for the survival of exporters that Japan participates in the TPP (Chiang, 2013). A Tokyo financial manager stated that, ‘the business community here is fully aware that if Japan does not join TPP, it will confirm Japan’s status as a has-been’ (Stokes, 2012). Without the TPP or another method for securing export markets, Japan will likely see a reduction in global market shares, especially in terms of the TPP member markets. The manufacturing sector continues to push this as an essential reason for Japan’s participation in the TPP (Chiang, 2013).

Japanese consumers would also benefit from trade liberalisation. Domestic food prices exceed world prices on average, which can be translated into a 66 per cent food consumption tax (Naoi & Urata, 2013). High prices are driven by high tariffs on imports which limit competitive pressure on the Japanese agricultural industry. Consumers face higher prices despite high subsidies in agriculture production, which equal USD 12.8 billion annually (Auslin, 2012). With an aging population engaged in agriculture and decreasing efficiencies from lack of competitive pressure, total Japanese agricultural output decreased by one-third from 1984 to 2007 (Auslin, 2012). Even without the TPP, many argue that Japanese agricultural policy needs reform to reduce subsidy payments and the fiscal burden. Agricultural liberalisation will open these markets to other member states, driving down domestic prices in Japan, and increasing consumer surplus. Many US exporters expect substantial growth in trade with Japan. The US beef industry alone estimates an increase in exports to Japan of up to USD 1 billion annually (Stokes, 2012).

Preliminary estimations of the impact of Japan agreeing to the unrestricted terms of the TPP were made by Todsadee, Kameyama and Lutes (2012), which emphasised impacts on the livestock industry. Japanese imports were estimated to increase by 1.49 per cent, primarily driven by increases in agricultural imports, which are expected change most in TPP importing countries. Todsadee et al. (2012) used the standard global trade analysis project (GTAP) model using the GTAP v7.0 database which is based on the 2004 global economy. Using 17 regions and 15 sectors, global macro changes were reported with emphasis on the livestock sector. US livestock output was estimated to increase by 3.85 per cent whereas Japan’s livestock output decreased by 24.81 per cent, which can be explained by decreased prices and domestic market shares. The full liberalisation of the Todsadee et al. (2012) study limits the ex-ante analysis of the impacts of the TPP, as a fully liberalised scenario is not likely.

Petri and Plummer (2012) estimate global net benefits at USD 295 billion annually after complete implementation of a fully liberalised TPP agreement, with the US gaining USD 78 billion annually. The study assumed it would take five years for the agreement to be fully implemented, and used this timeline to estimate the full effects. After creating a baseline from 2010 to 2025, and given the estimated timeline of adoption of the policies, the benefits were calculated using a heterogeneous-firms model rather than a country differentiated goods model. The focus of the article was to estimate the impacts of both a TPP and an Asian track agreement, so attention was not given to individual sectors. As stated above it is more likely that there will be limited concessions on agriculture from Japan; accordingly, this research furthers the literature by disaggregating impacts by sector.

Other works have also analysed the implications of Asian-specific FTAs. Petri and Plummer’s work looks at the Asian track agreement, analysing the effects China has on both inter-Asian trade (Petri & Plummer, 2012) and on the TPP with and without China’s potential participation (Xin, 2014). These are analyses of the TPP beyond this research and can be used as complementary analyses of important issues that also face the TPP negotiations.

This research contributes to the existing literature by providing an understanding of different concession scenarios from Japan on agricultural sectors, accounting for potential limited concessions from Japan on protected agricultural sectors. By varying the concession levels, the impacts on agriculture in the TPP and the Rest of the World (ROW) countries are estimated to provide an understanding of the significance of the level of concession that Japan may make under the TPP, compared to a fully liberalised scenario.

3. DATA AND METHODOLOGY

The analysis begins with the standard GTAP v8.0 database with a base year of 2007 (Narayanan, Aguiar & McDougall, 2012). The database is aggregated to 17 agricultural sectors as well as three non-agricultural sectors: capital-intensive manufacturing, labour-intensive manufacturing, and services. The regional aggregation includes 11 TPP partner countries (Brunei is excluded due to data limitations) and a composite twelfth region that includes ROW (Burfisher, 2013). The full regional and sectoral mapping is included in Appendix Tables A1 and A2. The primary factors of production are capital, land, and skilled and unskilled labour.

The standard GTAP model (Hertel, 1997) was used to understand the potential changes in domestic and international prices, as well as trade effects that may prevail in a restricted TPP agreement relative to a fully liberalised TPP scenario. The standard GTAP model includes a nested Constant Elasticity of Substitution (CES) production function for tradable commodities and a Constant Difference of Elasticities (CDE) specification for household demand which allows income to affect changes in consumer preferences. The CES production function provides for substitutability among primary factors across sectors except for land, which is limited in substitutability across crops. This specification allows producers to compensate for changes in prices. The model also includes detailed supply and demand elasticities as well as the Armington import demand specification to allow for product differentiation by region (Hertel, 1997). We used the standard GTAP macroeconomic closure. This defines savings as a driver for investment, with regional differentiation allowing for different rates of return on investments. Employment levels remain fixed in the model with adjustments in wages to clear the labour market. We recognise that it is realistic to assume that adjustments to both wages and the quantity of labour employed would occur. However, the standard closure with fixed employment and flexible wages is appropriate for this research as the focus is on changes in the US and Japan, which are both developed economies with policies in place to maintain a relatively stable labour market. The use of a CGE modelling framework allows for study of the cross-sectoral impacts of the TPP agreement, fully encompassing the breadth of the TPP. It allows for both producer and consumer impacts across sectors and regions. Similar to Todsadee et al. (2012), agriculture will be the focus of the discussion; however, in this analysis, we will vary the tariff reduction in each scenario to compare the impacts of an exclusionary agreement to that of a fully liberalised TPP.

As stated above, a fully liberated TPP is highly unlikely and unprecedented in terms of Japanese concessions. For the most recent FTAs that Japan has signed with ASEAN countries, the most protected agriculture sectors were exempted from these agreements (DTB Associates LLP et al., 2010) giving more credibility to the likelihood of a TPP with limited concessions in certain sectors. To model possible levels of limited tariff reform on the most protected agricultural sectors in Japan, we reviewed concessions in secondary agricultural sectors, those commodities not included in the most protected products. Historically the tariff reform for these secondary items has ranged from 9 per cent to 71 per cent in FTAs involving Japan from 2005 to 2008 (DTB Associates LLP et al., 2010). Using these past concessions as a guideline, we chose to investigate scenarios from relatively conservative concessions on agricultural products to full liberalisation for agricultural sectors. A 100 per cent tariff reduction level is the fully liberalised scenario considered in prior studies on the TPP. This work extends the discussion regarding the potential effects of the TPP by assessing the difference between a reduced tariff agreement and a fully liberalised scenario. This generates further information for policy makers about the impacts associated with various tariff reduction levels in agriculture. The reductions in import tariffs on agricultural goods in this study are: 5 per cent, 25 per cent and 50 per cent, which are compared to the effects of 100 per cent elimination of tariffs on agriculture. The reduction levels used represent the per cent reduction in import tariffs with 5 per cent representing a 5 per cent reduction in tariffs on imports entering Japan. The scenario modelled for the inter-TPP countries, the TPP countries excluding Japan, was modelled with full liberalisation (100 per cent), which means that tariffs between all countries excluding Japan are reduced to zero. Non-agricultural sectors in the study are fully liberalised in all cases. The emphasis of the negotiations has been on Japan’s entry into negations for the TPP and the terms that will be reached. In order to analyse the implications of an exclusionary TPP emphasising Japan as a trading partner, only Japan’s concessions were varied in this study.

It should also be noted that phytosanitary restrictions imposed on trade were not included in the model, which includes restrictions on beef imports from the US arising from bovine spongiform encephalopathy (BSE). While the beef phytosanitary restrictions have been relaxed on exports from the US to Japan (Cooper, 2013; Obara et al., 2010), there are still trade limitations due to these restrictions that remain outside the scope of the TPP tariff reform modelled in this framework.

4. RESULTS

There was an estimated increase in imports into Japan across all sectors with any level of tariff reduction. The extent of these changes is driven by the level of tariff reduction. Specifically, rice, beef products and milk have the greatest potential increase in imports: 51.5 per cent, 42.9 per cent and 35.4 per cent, respectively for the 25 per cent tariff reduction. These items are among the most protected in Japan and the increases in imports are reflective of trade distorting policies employed in these sectors. Figure 1 emphasises the relative changes in the imports of these products compared to the 14 other food products considered. As expected, the higher the tariff reduction modelled, the greater the increase in imports, emphasising the significance of the level of concessions Japan makes on import protection with TPP countries.

Figure 1

Source: Authors’ model estimations.

Wheat and grain imports increase across all scenarios. These increases in food grain imports are a result of reduced tariffs, but also a reduction in domestic production when imports become more competitive. There were demand changes across commodities for land, capital and natural resource endowments. The demand for land, capital and natural resources used in the beef cattle sector decreases. This contributes to decreasing demands for wheat and other grains, given the interdependence of food grains and livestock production.

Decomposing the increase in imports, exports from the US to Japan are expected to increase significantly even under conservative tariff reductions. However, this increase is muted when concessions on tariff reform are considered. Table 1 shows the percentage point different between the three concession scenarios and the fully liberalised agreement, emphasising the importance of the negotiated concession level on potential trade changes. For rice, US export sales at the 25 per cent reduction level are 292.9 percentage points less than the fully liberalised scenario. Consistent with other studies, we saw an increase in imports across agricultural sectors. However, when these import gains are compared to a fully liberalised TPP there are substantial reductions in these changes in trade. Milk, including powdered skim milk, at the 25 per cent reduction scenario experiences a 335.8 percentage point reduction in potential trade. For the US dairy industry the potential increased market access is greatly muted by an exclusionary TPP agreement.

Table 1

Percentage Point Difference to 100% Scenario in Export Quantity from the US to Japan

	5%	25%	50%
Rice	−370.7	−292.9	−195.7
Wheat	−51.0	−40.7	−27.7
Grains	−29.8	−23.8	−16.3
Fruit/Vegetables	−237.9	−188.1	−125.7
Oil Seeds	−90.2	−72.0	−49.4
Sugar Cane & Beets	−446.2	−352.6	−235.6
Plant-based Fibres	−225.7	−178.2	−118.7
Other Crops	−404.8	−320.0	−213.9
Beef Cattle	−138.7	−109.8	−73.7
Other Animal Products	−279.4	−220.7	−147.4
Fishery, Forestry & Mining	−1.1	−0.8	−0.5
Beef Products	−267.1	−211.0	−141.0
Other Meat	−533.0	−420.9	−280.8
Sugar	−292.7	−231.3	−154.5
Vegetable Oils and Fats	−333.1	−263.2	−175.8
Milk	−425.1	−335.8	−224.2
Other Food	−261.5	−206.5	−137.9
Labour-intensive Manufacturing	2.6	2.0	1.3
Capital-intensive Manufacturing	1.6	1.3	0.8
Services	2.0	1.5	1.0

Source: Authors’ model estimations.

While there are great disparities between reduction scenarios, the increases in expected imports are driven by decreases in import prices. Table 2 shows the percentage point differences in import prices for agricultural goods from the US to Japan for each concession scenario relative to the full liberalisation. At the 25 per cent reduction scenario, prices for rice imported into Japan from the US are 73.9 percentage points higher. The prices of US milk products exported to Japan are 74.5 percentage points higher, given the 25 per cent reduction scenario. In order to remain competitive, decreases in import prices will work to drive efficiencies in Japanese agricultural production and motivate sector efficiency gains.

Table 2

Percentage Point Difference to 100% Scenario in Import Price from the US to Japan

	5%	25%	50%
Rice	93.6	73.9	49.3
Wheat	93.5	73.8	49.2
Grains	93.2	73.6	49.1
Fruit/Vegetables	93.1	73.5	49.0
Oil Seeds	93.0	73.4	49.0
Sugar Cane & Beets	92.4	73.0	48.7
Plant-based Fibres	93.4	73.7	49.1
Other Crops	92.1	72.7	48.5
Beef Cattle	93.3	73.6	49.1
Other Animal Products	93.7	74.0	49.3
Fishery, Forestry & Mining	0.0	0.0	0.0
Beef Products	94.2	74.3	49.6
Other Meat	94.3	74.4	49.6
Sugar	94.3	74.5	49.7
Vegetable Oils and Fats	93.5	73.8	49.2
Milk	94.3	74.5	49.6
Other Food	94.6	74.7	49.8
Labour-intensive Manufacturing	−0.2	−0.2	−0.1
Capital-intensive Manufacturing	−0.2	−0.1	−0.1
Services	−0.2	−0.2	−0.1

Source: Authors’ model estimations.

Table 3

Percentage Point Difference to 100% Scenario for Japan Domestic Price Change

	5%	25%	50%
Rice	7.3	5.7	3.7
Wheat	33.7	26.4	17.3
Grains	55.3	43.6	29.0
Fruit/Vegetables	11.0	8.6	5.6
Oil Seeds	39.4	31.0	20.6
Sugar Cane & Beets	7.8	6.1	3.9
Plant-based Fibres	7.0	5.5	3.7
Other Crops	10.8	8.4	5.5
Beef Cattle	21.5	17.0	11.2
Other Animal Products	8.2	6.4	4.2
Fishery, Forestry & Mining	0.1	0.0	0.0
Beef Products	17.4	13.7	9.1
Other Meat	22.8	18.0	12.0
Sugar	9.6	7.5	5.0
Vegetable Oils and Fats	42.3	33.4	22.2
Milk	9.1	7.2	4.7
Other Food	8.5	6.7	4.4
Labour-intensive Manufacturing	0.4	0.3	0.2
Capital-intensive Manufacturing	0.4	0.3	0.2
Services	0.6	0.5	0.3

Source: Authors’ model estimations.

Domestic prices are also impacted by tariff reductions. Japanese private consumption prices are expected to decrease across all goods, which is consistent with the literature. For example, the domestic price decrease for rice was 2 per cent, while the price of beef cattle is expected to decrease by 5.2 per cent under the 25 per cent tariff reduction scenario. However, the magnitudes of price changes vary by scenario, with the highest tariff reduction showing the greatest reduction in price (Table 3). Domestic rice prices are expected to be 5.7 percentage points higher if the agricultural tariff reduction is only 25 per cent. Grains have the largest potential losses due to an exclusionary tariff reduction with a 43.6 percentage point difference at the 25 per cent level.

Decreases in domestic prices also impact Japanese producers, yet the full producer impact is also affected by price support policies in Japan. The concession level has a great bearing on producers, as the increased pressure from imported goods drives down domestic prices and decreases producer surplus. There are also increased government pressures to reduce the current subsidy rate in Japan, which will also affect Japanese producers. Because these policy changes will be secondary changes after adoption of the TPP agreement, the potential effects of changes in Japan’s domestic support programmes are not included in this analysis.

Equivalent variation (EV) was used to assess the consumer welfare impacts of the TPP across scenarios for all TPP countries excluding Brunei. Under the 5 per cent tariff reduction scenario, the welfare impact on Japanese consumers is negative, as Japanese producers have increased access to export markets with relatively little increases in more competitive imported goods, which could drive down domestic prices. However, for all other levels of concessions considered, Japanese consumers experience a gain in welfare. This implies that from the perspective of welfare evaluation, if Japan should agree to the TPP, it should do so at a tariff reduction level on agricultural products higher than 5 per cent for positive consumer welfare impacts.

Table 4

EV Difference to 100% Scenario (million USD)

	5%	25%	50%
Australia	−1,947.9	−1,530.4	−1,008.5
Canada	−1,150.8	−900.3	−587.2
Chile	−627.4	−493.6	−326.4
Japan	−8,672.1	−7,031.1	−4,979.9
Malaysia	−431.4	−334.6	−213.7
Mexico	−31.1	−21.3	−9.0
New Zealand	−650.0	−509.9	−334.8
Peru	−99.7	−78.3	−51.5
Singapore	−29.2	−20.4	−9.3
United States	−5,891.7	−4,600.1	−2,985.7
Vietnam	−825.7	−651.6	−434.0
Rest of World	7,256.3	5,757.3	3,883.5

Source: Authors’ model estimations.

Table 4 shows the differences in welfare impacts. At the 25 per cent scenario Japan has a USD 7 billion loss of potential welfare gains. This exemplifies the welfare implications of concession level choices. When discussing the potential benefits of the TPP agreement, the level of concession may substantially reduce the prospective gains. Due to the large trade relationship between the US and Japan, US welfare is reduced under more conservative trade liberalisation. At the 25 per cent scenario the US has a loss of potential welfare of USD 4.6 billion compared to the 100 per cent scenario. Doubling the de-tariffication to 50 per cent decreases this loss to USD 2.99 billion or 35 per cent from the 25 per cent level. Note that Australia is also greatly impacted by reduced de-tariffication. For the 5 per cent level there is a loss of USD 1.95 billion driven mainly by the beef sector.

As expected, the ROW is expected to experience negative welfare effects. The positive values in Table 4 demonstrate the potential benefits the ROW has in the face of reduced Japanese de-tariffication, in comparison to a fully liberalised trade agreement. These welfare changes are expected to occur as a result of trade being diverted from non-TPP countries to TPP regions, therefore benefiting participating countries by providing them with more favourable trade positions. The impact on ROW is USD 7.3 billion mitigation of potential losses if Japan liberalises to the 5 per cent level rather than at the 100 per cent. This change in ROW welfare in terms of potential welfare losses is also a salient negotiation point for Japan. Much of Japan’s trade comes from other non-TPP countries. Specifically, China, a non-TPP country, is one of Japan’s largest trading partners, and other Asian countries have a large portion of Japanese trade with 54.3 per cent of exports and 44.3 per cent of imports going to other Asian countries (Japan External Trade Organization, 2013). The welfare effects on third-country parties that are not included in the TPP should factor into negotiations regarding the actual levels of tariff reductions in the TPP agreement.

The most favourable option for the ROW is to keep trade relations as close to status quo as possible, thus ROW benefits from lower levels of tariff reductions in Japan. When totalling the potential global implications of an exclusionary TPP agreement compared to a fully liberalised agreement, there is an expected USD 13.1 billion loss in global welfare at the 5 per cent level and a USD 10.4 billion loss at the 25 per cent level.

Table 5 decomposes the total welfare effects into the three contributing factors: allocative efficiency effects, terms of trade effects and effects due to changes in investment of goods and savings (I-S effects). As expected, there are positive gains in Japanese terms of trade efficiency due to the fact that Japan alone is modelled with an exclusionary TPP agreement. Terms of trade are most favourable for Japan at the 5 per cent scenario compared to full liberalisation with an increase of USD 4571 million in welfare attributable to terms of trade effects. However these gains come at the cost of allocative efficiency where Japan loses USD 12,978 million in potential welfare under the 5 per cent scenario relative to the fully liberalised agreement. Across all other TPP-participating countries, terms of trade are significantly reduced due to limited tariff reform by Japan under each liberalisation scenario. As expected, the ROW gains from limited concessions from Japan including those countries that currently trade with Japan that would experience a reduction in trade due to the TPP agreement.

Table 5

Welfare Decomposition Difference to 100% Scenario (million USD)

	Allocative Efficiency Effects			Terms of Trade Effects			I-S Effects
	5%	25%	50%	5%	25%	50%	5%	25%	50%
Australia	−30.8	−24.0	−15.6	−1,913.5	−1,503.1	−990.1	−3.6	−3.2	−2.8
Canada	−112.9	−89.4	−59.9	−1,147.4	−896.3	−582.3	109.6	85.3	55.0
Chile	−62.6	−49.3	−32.7	−804.0	−632.4	−417.8	239.2	188.0	124.0
Japan	−12,977.6	−10,308.6	−6,972.5	4,570.8	3,475.0	2,105.3	−265.4	−197.6	−112.9
Malaysia	−68.3	−53.0	−33.9	−421.4	−327.3	−209.7	58.2	45.6	29.8
Mexico	68.9	53.7	34.7	−199.5	−152.2	−93.1	99.4	77.2	49.3
New Zealand	−71.3	−56.1	−37.2	−594.7	−466.2	−305.7	15.9	12.4	8.1
Peru	−46.8	−37.0	−24.6	−95.1	−74.3	−48.2	42.2	32.9	21.3
Singapore	1.2	0.9	0.6	−76.7	−57.3	−33.1	46.4	36.1	23.2
USA	28.7	12.0	−8.9	−4,126.9	−3,214.1	−2,073.0	−1,793.3	−1,397.9	−903.7
Vietnam	−140.6	−116.6	−86.7	−593.0	−462.5	−299.3	−92.2	−72.5	−48.0
ROW	311.3	252.9	180.0	5,401.6	4,310.7	2,947.1	1,543.5	1,193.7	756.5

Source: Authors’ model estimations.

5. CONCLUSIONS

Despite an initial deadline of 2013, TPP negotiations have not culminated in an agreement to date. One major point of contention continues to be tariff reductions for the five key protected agricultural products in Japan including rice, wheat, barley, powdered skim milk, butter, pork and beef. If Japan agrees to the unrestricted version of the TPP, this will drastically increase market access for US agriculture. However, based on internal pressure from Japanese agricultural interest groups, it is expected that there will be potential exceptions made before a final TPP agreement will be signed. These exceptions will lessen the trade liberalisation benefits originally expected from the TPP agreement as reported in current literature. By analysing TPP scenarios with varying concessions from Japan on agriculture, the impacts of the TPP are estimated, to better understand the potential implications for the US and, more specifically, the impact on US agriculture across varying levels of Japanese tariff reductions. Exports of US agriculture to Japan are estimated to increase across varying levels of tariff concession scenarios, but the differences between the 25 per cent scenario and full liberalisation are great especially for protected products. Total Japanese import demand is expected to increase, driven by decreased import prices, which are muted by an exclusionary agreement. The total estimated welfare gains for Japanese consumers at concession levels greater than 5 per cent are positive net gains. US consumers have reductions in potential welfare gains across exclusionary scenarios. The current status of the TPP negotiations are unknown, given the enforcement of closed proceedings; however, both the US and Japan have much at stake in negotiating the terms of the TPP. This analysis provides insights into the impacts on agriculture in both the US and Japan as a result of limited tariff reform in Japan.

Footnotes

Appendix

Table A2

Sectors Included in the Model

No.	Name	Description	GTAP Sectors in the Model
1	Rice	Rice	pdr pcr
2	Wheat	Wheat	wht
3	Other grains	Other grains	gro
4	Fruits/vegetables	Fruits and vegetables	v_f
5	Oilseeds	Oilseeds	osd
6	Sugar cane/beet	Sugar cane and sugar beet	c_b
7	Fibres	Plant-based fibres	pfb
8	Other crops	Other crops	ocr
9	Bovines	Bovine livestock and prods.	ctl
10	Other animals	Other animals and products	oap wol
11	Resources	Fishery, forestry, mining, extraction	frs fsh coa oil gas omn
12	Beef	Bovine meats and products	cmt
13	Other meat	Other meat products	Omt
14	Sugar	Raw and refined sugar	Sgr
15	Oils and fats	Vegetable oils and fats	vol
16	Milk	Fluid milk and products	rmk mil
17	Other food	Other food and beverage products	ofd b_t
18	Labour-int. mfg	Labour-intensive manufacturing	tex wap lea lum fmp mvh otn ele ome omf
19	Capital-int. mfg.	Capital-intensive manufacturing	ppp p_c crp nmm i_s nfm
20	Services	Services	ely gdt wtr cns trd otp wtp atp cmn ofi isr obs ros osg dwe

Source: Authors’ model aggregations.

Note: For more thorough description of commodity codes included see https://www.gtap.agecon.purdue.edu/databases/v8/v8_sectors.asp

References

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