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2015.09.17

Japanese Agricultural Trade Policy and Sustainable Development

International Centre for Trade and Sustainable Development on September 11, 2015

EXECUTIVE SUMMARY

Japan has made it a top priority to keep many agricultural products exempt from substantial reductions or elimination of tariffs. In relation to the Trans-Pacific Partnership (TPP) negotiations, the agricultural committees of the Japanese Diet have adopted resolutions urging the government to leave the negotiating table if it cannot have Japan's rice, wheat, beef and pork, dairy products and sugar exempted from the tariff elimination in the TPP agreement. The resolutions have constrained the Japanese government in the TPP negotiations.

In contrast to Japan, the European Union, which took a defensive position in the agricultural negotiations of the Uruguay Round, undertook agricultural policy reform and played a more active role in the Doha Round. The EU has shifted its policy from price support to direct payments, protecting agriculture while also supplying agricultural produce to consumers at low prices. What tariffs are really protecting in Japan are high domestic prices for agricultural products.

Rice is a sacrosanct product in Japanese politics. The acreage reduction programme for rice was first introduced in Japan in 1970. 40 percent of paddy fields is set aside from rice production under this programme in order to support the price of rice. The Japanese people bear not only the costs of subsidies allowing farmers to join the programme but also the high price resulting from it. The burden of the Japanese people as taxpayers and consumers amounts to one trillion yen while the product of the Japanese rice industry is worth only two trillion yen.

MAFF has justified its own policy in the name of food security and "multifunctionality". In reality, however, Japanese agricultural policy has damaged both of them. Due to the acreage reduction programme for rice, Japan has lost 1 million hectares out of 3.4 million hectares of paddy fields which could contribute to food security, and as a result have lost most of the environmental benefits associated with agriculture in Japan.

The same policy has also damaged the Japanese rice industry. The high price of rice has kept a lot of inefficient small-scale part-time farmers in the industry. Full-time farmers find it difficult to acquire land and expand the size of their farms. Full-time farmers have not been able to reduce costs and increase their income.

However, the agricultural cooperative (JA) has strongly demanded this policy. Higher rice prices translated into more revenue from commissions for selling rice and higher sales of inputs, such as chemical fertilisers and pesticides, at higher prices. In addition, the JA has a hand in everything from banking, life insurance and accident insurance, for farmers and non-farmers alike, to sales of all agricultural products and materials, as well as the supply of daily commodities and services. For the JA, the continued presence of these part-time rice farmers has been advantageous. Income from part-time non-farming work, which is four times greater than farming income, as well as profits from the sale of farmland for other purposes (trillions of yen every year), is all deposited in the accounts of the JA, building the JA into Japan's second biggest megabank. Keeping rice prices high and part-time farmers on their farms has been the foundation of the JA's growth and prosperity.

It is not too much to say that the future of Japan's agriculture rests on whether we can successfully destroy the solid 'rocky mass' of the rice paddy set-aside programme, which is one of the central pillars of Japan's post-war agricultural policy. The Abe administration has embarked on the reform of JA for the first time in 70 years, although the fundamental reform is yet to come.

If the acreage reduction programme is abolished, resulting in lower rice prices, part-time farmers will lease their farmland to others. If the beneficiaries of direct payments are limited to full-time farmers, they will be better able to pay their land rent. Thus, farmland will be concentrated in the hands of full-time farmers, and the scale of their farming will grow. Discontinuing the acreage reduction programme will increase the yield per unit of land area. All of these will combine to make Japanese rice more competitive in the world market.

Japan saw its agriculture decline despite its intention to protect the domestic market by means of high tariffs. This domestic market is shrinking due to an ageing and decreasing population. Japan's agriculture will have no future without cultivating the export market. Lower tariffs in export destinations will be favourable to export expansion. The agricultural sector should act proactively on negotiations on TPP and other trade deregulation that serve to remove tariffs imposed by trade partners and to facilitate exports. Japanese agriculture could survive by exporting highly value-added agricultural products such as Koshihikari, a Japanese high-quality variety of rice, while importing rice from Vietnam or Thailand. Japan can open its market to developing countries and enhance their sustainable development.


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