Attention surrounding the Trans-Pacific Partnership (TPP) trade pact is heating up. Last week, Detroit's Big Three automakers came out in opposition to allowing Japan to enter free-trade talks with the United States and the current TPP countries. There are nine countries currently involved in the TPP negotiations: Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the United States and Vietnam.
The U.S. pork industry is interested in advancing TPP trade talks, but also is very interested in bringing Japan into the mix. The auto industry is vehemently opposed to allowing Japan in, but would be willing to open discussions up to Mexico and Canada. The National Pork Producers Council (NPPC) supports Mexico’s inclusion, but opposes adding Canada.
ast week, NPPC and the American Automotive Policy Council both submitted comments associated with the Federal Register notices and their respective positions.
The auto group said Japan shouldn't be allowed to join free talks for at least two years. It wants a multi-year commitment from Japan to open its auto market to imports.
A free-trade deal could drop tariffs on Japanese vehicles entering the United States and make it more economically viable to build vehicles in Japan and export them to the United States, reports the Detroit News. The Japanese currently pay a 2.5 percent tariff on cars and a 25 percent tariff on trucks exported from Japan to the U.S.
Japanese automakers have complained about the Japanese yen’s high value, which raises the cost of their exports to the United States, and have been talking about moving production outside of the country unless the yen weakens. U.S. automakers argue that could amount to currency manipulation and an unfair trade practice.
Japan is the third-largest automotive market in the world, but it ranks 30th out of 30 countries in terms of access for imports, according to the Organization for Economic Cooperation and Development. In 2010, total auto imports into Japan from the world were 4.5 percent, or 225,000 vehicles, in an auto market that sees nearly 5 million in annual sales.
Japanese automakers controlled more than 95 percent, or 4.7 million vehicles, of the domestic auto market, reports the Detroit News. The United States imported 5.8 million vehicles in 2010, representing more than 45 percent of the total U.S. automotive market.
On the pork side, NPPC supports Mexico’s and Japan’s entry into TPP, which would provide U.S. pork producers an opportunity to increase sales to its top two export markets. Japan is the top value market for the U.S. pork industry-- $1.65 billion in 2010. Mexico is the industry's largest volume market and the No. 2 value market—545,000 metric tons, valued at $986 million in 2010. The Mexican market represents 20 percent of U.S. pork exports and 4 percent of U.S. annual pork production.
NPPC is against adding Canada because of the country’s subsidies to its pork sector. NPPC contends that the subsidies violate a U.S. countervailing-duty law and World Trade Organization rules and would negatively impact U.S. pork industry employment. The subsidies continue to cause significant distortions to the North American hog market, NPPC said in its comments.
According to Dermot Hayes, Iowa State University economist, the newly implemented Ontario Risk Management Program provides income stabilization to Canadian pork producers. He calculates that it would cause U.S. pork industry losses of $162 million in production value and cost nearly 1,300 U.S. jobs within 10 years after implementation.
Because subsidies currently are not being discussed in the TPP negotiations, NPPC officials say they will continue to oppose Canada’s inclusion in the TPP until the country eliminates its pork industry subsidies.
This is not the first time that the U.S. auto industry has raised havoc with the pork sector’s trade objectives. The South Korea free-trade agreement was stalled due to auto and beef issues. To help move the pact forward, U.S. pork producers agreed to delay implementing the zero-tariff rate on exports to South Korea from Jan. 1, 2014 to Jan. 1, 2016.
Source: NPPC, Detroit News Washington Bureau