The United States spent eight years negotiating the Trans-Pacific Partnership (TPP). This 12-country Pacific Rim trade pact was partly designed to build an economic and diplomatic alliance that would keep China, which had been excluded from the deal, in check.
But the United States’ objective was also to open up new markets for U.S.-made products, especially U.S. agricultural goods. A 2016 analysis from the International Trade Commission found that agriculture and food would be the U.S. sector that saw the greatest percentage gain in output growth as a result of the TPP.
Greater access to the Japanese market was particularly enticing to U.S. farmers and ranchers. Japan is a wealthy, mature economy — where high-income consumers can afford high-end U.S. beef and high-quality U.S. grains — but it’s also an economy that has had high barriers to agricultural trade.
And so, as part of the TPP talks, the U.S. trade team spent about a year negotiating one-on-one with Japan about agriculture, with the understanding that whatever concessions the United States won would be granted to the other TPP member countries as well.
This allowed us to “design the shape of a package that catered to U.S. priorities,” explains Darci Vetter, then the chief agricultural negotiator in the office of the U.S. Trade Representative.
Of course, some of these priorities overlapped with those of other TPP countries. Both the United States and New Zealand were eager to sell more dairy and wine to Japan, for instance. Both the United States and Canada wanted Japan to lower tariffs on wheat. Which is why other countries were more than happy to let us push for as many concessions as we could.
Japan determined that the overall pact would be so valuable that it made the politically contentious choice of agreeing to our requests. Incidentally, the agricultural terms we’d negotiated in the TPP also became the template for a trade deal that Japan would separately negotiate with the European Union.
Disappointed that we’d reneged, the remaining 11 TPP countries nonetheless decided to continue without us. Their new deal, sometimes called TPP 2.0, formally went into effect on Dec. 30, 2018. Just over a month later, Japan’s new trade deal with the European Union became effective.
This means that dozens of other countries now benefit from changes we persuaded Japan to make. And our farmers are about to lose out, big time.
Japan’s beef imports were already up 25 percent in the first two months of 2019 compared with a year earlier, as the Wall Street Journal recently reported. The biggest beneficiaries were Canada and New Zealand. This makes sense: As members of TPP 2.0, they have a huge price advantage. U.S. beef is tariffed at 38.5 percent, and TPP 2.0 countries’ beef is now at 26.6 percent, with further reductions slated for coming years.
Even before then, these other countries’ advantages will widen. If frozen beef imports surpass a certain threshold, as is expected soon, a “safeguard” tariff will automatically kick in and raise tariffs on our products — but not TPP 2.0’s members’ — to 50 percent.
With U.S. farmers quietly freaking out, pressure is mounting to seal a new bilateral trade deal with Japan. But rather than coming to Japan hat in hand, we’re scolding it for keeping its word when we could not be bothered to do the same.
“By implementing these agreements before addressing our bilateral trade relationship, Japan is effectively redistributing market share away from its strongest ally, the United States,” the U.S. ambassador to Japan, William Hagerty, told Nikkei.
Hagerty is also not the only one — Sen. Rob Portman (R-Ohio) made a similar comment about Vietnam — urging TPP countries to extend the benefits of a deal we negotiated and then rejected.
I asked Vetter what she made of Hagerty’s remarks. She noted that the whole point of the TPP was to deepen member countries’ economic and diplomatic ties. From that perspective, then, the Trump administration is just angry that it’s working.
“Frankly,” she said, “you can’t leave someone at the altar and then be surprised or upset that they’ve moved on.”