Japanese tariffs, increase in sales tax likely to hurt sales

By RICHARD SMITH

For the Capital Press

TOKYO -- The U.S. Meat Export Federation's top executive has warned Japanese consumers of the inevitable: higher beef prices are ahead.

MEF's export-to-Japan projection for this year is 150,000 tons, a 24 percent year-on-year increase, but the costs of feed and production are constantly going up, the federation's Phil Seng said.

"So for beef-importing countries, that means prices of beef are going up," Seng said.

In addition, some U.S. beef-producing states, including Oklahoma, Colorado and Texas, experienced drought last year, so female cows were taken to slaughter earlier, resulting in a cattle shortage, Seng said.

The same problem hit the U.S. pork industry.

"Numbers went down, so we will have the same price increase (for pork)," Seng said.

Yet compared to last year, MEF expects a 5 percent increase in pork exports to Japan this year to 340,000 tons, he said.

Seng pointed out in the present context of rising meat prices, high tariffs and the Japanese government's plans to raise the sales tax, presently at 5 percent, consumers here would be hard-pressed to buy imported beef.

"The tariff for beef is 38.5 percent. If you raise the consumption tax to 15 percent, it becomes very difficult for consumers," he said.

Seng made a pitch for Japan to join the Trans-Pacific Partnership Agreement. A multilateral free-trade agreement between Brunei, Chile, New Zealand and Singapore, the original agreement aimed to reduce all trade tariffs among members by the year 2015.

The U.S, Australia, Japan, Malaysia, Peru and Vietnam have entered negotiations to join the group. Seng said the U.S. beef industry would welcome Japan's participation.

"When you look at the indicators in Japan, there would be benefits for Japan in the TPP going forward," Seng said.

In an interview, Seng told Capital Press cuts for yakiniku -- Korean-style barbecue -- were in high demand here, rebounding from last year.

"Last year, with the earthquake, things were very slow, restaurants were closing," he said.

U.S. exporters can expect to slowly regain the market share taken by Australia after the closing of the Japanese market to U.S. beef in 2003 for 2 1/2 years because of the discovery of bovine spongiform encephalopathy, or mad cow, Seng said.

Despite Australia having a virtual monopoly -- 93 percent -- in the Japanese import beef market in 2004 and 2005, U.S beef's absence from the market left a 200,000-ton gap Australian beef could not fill, Seng said.

Japanese prefer F1 --marbled dairy beef -- and far from turning to exclusively to Australian beef, a significant proportion of the Japan food service substituted U.S. pork for U.S. beef.

"This gave a big boost to our pork industry," Seng said.

"We think we would regain our (pre-BSE) market share, not as fast as the Americans would like, but faster than the Aussies would like," he said.

South Korea, where U.S. beef exports eclipsed Australian beef in the last two or three months, stands as a case in point, Seng said. As the South Korea-U.S. Free Trade Agreement took effect March 15 and tariffs for beef imports there started coming down, importers rushed to buy U.S. beef, Seng said.

And Japan's Food Safety Commission looking at relaxing the U.S. beef age limit, presently set at meat from cattle aged 20 months and younger as an anti-BSE measure, would do wonders for the U.S. beef export industry, Seng said.

"With Japan moving forward, it will make it easier for us to deal with the Chinese. South Korea (with a U.S. beef age limit of 29 months) is also moving ahead," he said.