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Japan Should Move Quickly to Participate in the TPP Negotiations

Agriculture is the area that more strongly needs the TPP

Since agriculture is conducted on a smaller size in Japan compared to the United States and Australia, some assert that it is expensive and less competitive. In terms of farm area per farming family, if Japan is 1, then the EU is 9, the United States is 100, and Australia is 1,902.

It is true that costs decrease as production size grows, but size is not the only important factor. If the above assertion proved true, the United States, which is the world’s largest agricultural exporter, cannot compete with Australia because its scale is 1/19 that of Australia. This assertion does not consider the differences in crops being produced. The United States mainly produces wheat, soybeans and corn, while Australia mainly produces livestock fed with pasture grass. Japan cannot appropriately be compared with these countries since it mainly produces rice. Threats regarding Japanese rice production mainly come from China, but the size of farming families in China is only one-third that of Japan. Also notable is that even for the same crop great differences are found in yield per area and quality. Since the yield of wheat in France is triple that in the United States, a farming family owning 100 hectares of farmland in France is more efficient than one in the United States with 200 hectares.

There are japonica and indica varieties of rice, and huge differences in quality are present just in the japonica variety. Within Japan also, prices differ by 1.7–1.8 times even among the koshihikari breed cultivated in the Uonuma region of Niigata Prefecture and other production areas. In the international markets as well, rice produced in Japan is highly regarded. Today in Hong Kong, the wholesale price (per kilogram) when purchased from a trading company of Japanese koshihikari rice is 380 yen, while the same breed of rice produced in California is 240 yen, in China is 150 yen, and the general japonica variety produced in China is 100 yen. Comparing low-quality rice produced in other countries with rice produced in Japan is like comparing a light vehicle to a luxury Mercedes.

As shown in the figure, the difference in prices of rice produced in Japan and that of similar quality produced in China (imported by imposing the minimum access) has reduced significantly in the past decade. Today, the difference in prices of domestically sold rice in China and the imported price has fallen below 30%. Since the price of rice produced in Japan at around 13,000 yen was realized by limiting the supply through the policy of trimming rice production, the price would fall to 9,000 yen if the policy were abolished; prices of rice produced in Japan and China would reverse their positions.

It has been asserted that the TPP would greatly damage agriculture in Japan, yet even if prices of agricultural products declined, producers would not be harmed if subsidies were paid directly to agricultural producers for maintaining production, as in the United States and the EU. This allows maintaining of agriculture’s multi-faceted functions other than agricultural production, including cultivation of water resources and prevention of floods. If prices drop unexpectedly, the amount paid directly can be increased. If an unexpected increase in imported products affects domestic industries, safeguard measures can be incorporated in the TPP conventions.

Regarding rice production, farming families engaged in additional professions would start selling their farmland if rice prices went down due to abolishing the policy for trimming rice production. If subsidies were directly paid only to farming families exclusively engaged in rice production, their ability to rent land would rise, causing farmland to accumulate in these families and their scale of production to rise. If the yield rose when total consumption is constant, the area of rice paddies needed for rice production would decrease, which would expand the area of paddies where rice was not produced, causing the amount of subsidies for paddies set aside for rice production to increase. This was disliked by the Ministry of Finance. Efforts to breed improvement for enhancing yield would no longer be made. If the yield of rice in Japan came close to that in California, the rice production cost of 6,000 yen by large-scale farming families would fall to 4,300 yen, which is close to the price of rice produced in Thailand. If expanding the farming scale and increasing the yield further reduced costs, Japan’s rice industry could be converted to an exporting industry. While the domestic agricultural market shrinks in the age of population decline, agriculture in Japan can only erode unless export is promoted by eliminating tariffs and non-tariff barriers of trading partner countries. Negotiations for trade liberalization are indispensable for Japanese agriculture as well.

Translated from “TPP Kosho ni soki ni sanka subeshi (Japan should promptly participate in Trans-Pacific Partnership Agreement negotiation),”Diplomacy (Gaiko), Vol.9 (September 2011), pp. 122–127. (Courtesy of Toshishuppan, Publishers)