Ever since Toyota and Honda were forcing GM, Ford, and Chrysler to shape up the hard way, the US government has pushed Japan to open up its markets, particularly its automotive market, and the fact that it’s still pushing shows how little success it has had. Back in the 90s, the cited reason for the near non-existence of US-branded cars in Japan was that they weren’t of the quality Japanese consumers wanted. OK, but today?
“The US government urges Japan to address the full range of barriers in Japan’s automotive market,” pleaded the Office of the US Trade Representative in its just released 2012 National Trade Estimate Report on Foreign Trade Barriers. Indeed, the Japanese automotive market remains largely sealed off to US automakers through nontariff barriers such as lack of transparency, standards and certification issues, and impediments in building distribution and service networks.
It’s not just cars. The racket to protect Japan’s pork producers is almost silly—and very costly to the hapless Japanese consumer. Imported pork whose price exceeds the government-set reference price will get away with a 4.3% ad valorem tax. Any pork imported at a price below the reference price is slapped with an additional duty that brings its price up to the reference price. Hence, there are no lower-priced imports of pork.
And beef. The base tariff is 38.5%. But it jumps to 50% when import volume rises by more than 17% from prior year. Japan uses health concerns as fig leaf for blocking imports entirely. In December 2003, a cow in the US that had been imported from Canada was discovered to have Bovine Spongiform Encephalopathy (BSE or Mad Cow Disease). Japan immediately blocked all imports of beef from the US. December 2005, under intense US pressure, Japan reopened its market to US beef, with strict safeguards. When one single exporter violated one single rule a month later (it had shipped a forbidden vertebral column), Japan closed its market to all US beef for seven months.
The arm-wrestling continued. February 2011, Japan blocked beef imports from a packer in Nebraska that couldn’t prove, as the rules required, that the intestines in one shipment were from cattle no older than 20 months. It took till today, to get the ban lifted. Beef jerky, which has quite a following in Japan, and other processed beef products are still blocked. Meanwhile, Japan had 29 BSE cases in its own herds (compared to 3 in the US). And now some of its cows are radioactive.
Tariffs impact citrus, apples, wine, cookies, wheat, wood products, shoes, leather, shredded mozzarella…. In addition, nontariff restrictions and entanglements, such as legendary customs processing, keep imports out or make them more expensive. Yet, high-priced luxury goods jumped over the hurdles and turned Japan into the world’s largest market for them—until China came along. Cognac, dresses, handbags, Ferraris….
And then there is rice, the sacred crop. Of the 1.63 million farmers in Japan, 80 percent are part-timers who make 90% of their income from other sources. Farmed on small plots, rice is Japan’s most inefficient crop and absorbs most of the agricultural subsidies. It’s expensive in grocery stores. And now that fears of contamination are added to the price, imports have become very popular.
Alas, imported rice gets whacked with a tariff of … 778%! Ouch! Only 682,000 metric tons of rice may be imported tariff-free, most of which is acquired by the government for stock and released later for animal feed. Only about 100,000 tons can be imported tariff-free as food—1.25% of domestic production of 8 million tons. Hence, even imported rice is expensive.
The latest excuse for blocking imports: Takeshi Nakano, associate professor at Kyoto University and ex-finance-ministry official, one of the media poster boys of protectionism, said that cheaper imports would aggravate deflation.
Ah yes, there it is, the reason for deflation—though he used it in a twisted manner. In 1996, when I went there the first time [check out my book on that adventure, BIG LIKE: CASCADE INTO AN ODYSSEY], Japan was a shockingly expensive country, even in mundane things. Trade liberalization gradually opened up the market to imports and forced domestic producers to become more efficient and competitive. Eventually, this will even impact rice farming. And prices will ease further. In the mayhem of Japan’s unspeakable fiscal woes and tough economy, this is a bit of good news for the consumer.