Japan's Beggar-Thy-Neighbour Food Policy

♠ Posted by Emmanuel in at 4/25/2008 02:13:00 PM
Japan's approach to agriculture is schizophrenic, to say the least. While it would like to maintain some of the world's highest subsidies and tariffs to protect locally produced food, it is also keen on maintaining a steady supply of food imports from abroad as it is the world's biggest net food importer. It is beggar-thy-neighbour at its most undiluted: try and maintain as much domestic protectionism while making everyone else shoulder the burden of high subsidies and tariffs. With a lot of developing countries now restricting food to ensure that local supplies are kept at adequate levels--and, more importantly, to avoid food riots--Japan is set to lobby the WTO on disallowing restrictions on others' exports of important grains. The asymmetry is striking, and it would get even more striking if Japan got its way. From Bloomberg:

Japan, the world's biggest net food importer, will ask the World Trade Organization as early as next week to introduce rules to prevent countries from restricting exports of wheat, rice and other grains. Countries such as Thailand, Vietnam and China have imposed export curbs on rice as shortages caused prices to double in the past year. Shortfalls in other staples are starting to bite in Japan, where a reliance on imports of cattle-feed led to a butter shortage and a gain in wheat costs pushed up bread prices 8 percent in December, the first increase in 17 years.

``Japan wants balanced rules for food exporters and importers,'' Hiroaki Kojima, deputy director for international economic affairs at Japan's Agriculture Ministry, said in a phone interview. ``Food exporters can freely export or not, but importers are told to remove restrictions and lower tariffs.''

Securing WTO intervention may be difficult for Japan, which is also delaying seeking imports of rice it's committed to under the trade body's rules. Developing nations are pressing Japan to reduce subsidies and import tariffs as high as 700 percent on farm products and open its market in the Doha Round of WTO talks.

Raj Patel, author of the book ``Stuffed and Starved'' about global food disparity, said developing countries will likely get more protectionist, following recent shortages that caused protests and riots in Haiti, Egypt and the Ivory Coast. ``The places facing the worst crisis are the ones where safety buffers like import tariffs and reserves have been removed,'' he said by phone last week. ``The nasty end of the whip has cracked down on the poorest communities in the world.''

Japan will delay tendering for imports of rice required under a WTO agreement until international prices stabilize, a senior government official said late yesterday. He declined to be identified as a decision hasn't been formalized. Japan imported 630,550 tons of rice in the year ended March 31, falling short of the 770,000 tons a year it agreed to. Rice prices in Chicago rose to higher than $25 per 100 pounds for the first time today because of speculation more countries may curb their exports. ``There's a profound irony that countries like Japan that have wriggled most successfully out of WTO rules on agriculture are doing the best,'' Patel said. Japan is the world's largest net food importer, buying 7.9 trillion yen ($76.4 billion) a year compared with 434 billion yen in exports, the government says.

The country imports 86 percent of its wheat and the government was forced to raise prices 30 percent this month. Consumer prices probably rose 1.2 percent in March, the fastest pace in a decade, because of increases in energy and grain costs, a Bloomberg survey of economists shows. The statistics bureau will release the figures tomorrow. Yamazaki Baking Co., Japan's largest bread and pastry maker, said it will raise prices of bread, cakes and sweet buns by around 8 percent next month after increasing them for the first time in 17 years in December.

``Until now Japan could rely on purchasing food from anywhere in the world because consumers can afford to pay,'' Yasuhiko Nakamura, head of the government's food education council, said last week. ``In the future, it may be impossible to import even if we have money.'' Nakamura says Japanese should eat more rice, the only major agricultural product where it's 100 percent self-sufficient. Consumption has fallen to 8.5 million tons a year from a peak of 12.99 million tons in 1965 and production will exceed demand this year by 210,000 tons.

Rice consumption is central to government efforts to boost food self-sufficiency to 45 percent from 39 percent by 2015. Japan's rice farmers are among the most cosseted in the world, receiving 53 percent of their income in government support, according to the OECD.

Import tariffs of 341 yen ($3.19) per kilogram, inefficiency and lack of competition, has rice in Tokyo selling at almost five times the price in Chicago. Domestic Japonica rice sold for 257 yen ($2.48) a kilogram this month, compared with 55 U.S. cents a kilogram for rough rice on the Chicago Board of Trade yesterday. Producing 60 kilograms of rice costs a Japanese farmer around ten times more than a farmer in the U.S., according to Japan's Agriculture Ministry.

``Economically it makes more sense for Japan to import California rice, which is not distinguishable from domestic rice,'' Emiko Ohnuki-Tierney, a professor of anthropology at the University of Wisconsin and author of the book ``Rice as Self,'' said in a phone interview.

Further WTO liberalization has Japan's farmers worried at a time when their numbers are declining. The number of farmers shrank to 3.4 million in 2005 from 14.5 million in 1960 as people aged over 60 rose to 69.1 percent of the population from 17.5 percent.

A report last year by Japan's Agriculture Ministry showed removing all import tariffs would reduce Japan's agricultural production by 42 percent, or 3.6 trillion yen. Around 90 percent of domestic rice production would be replaced by foreign imports, while Japan's self-sufficiency rate would fall to 12 percent from 40 percent, the report said. The Agriculture Ministry's Kojima acknowledged seeking the removal of export restrictions may anger food exporters. Japan will seek support from other food importers including Norway, Switzerland and South Korea, he said.