THE TTALK QUOTES 

On Global Trade & Investment
Published By:
The Global Business Dialogue, Inc.
Washington, DC  Tel: 202-463-5074
 
No. 60 of 2019
THURSDAY, SEPTEMBER 5, 2019

Click HERE for the August 24 quote on life and learning.


IDAHO WHEAT: REGAINING A TRADITIONAL MARKET

 "The Japanese flour mills particularly prefer [our] soft white wheat, which is ideal for their sponge cakes and pastries."

Ned Moon
August 26, 2019
CONTEXT
Fighting inequality was the theme – or themes – of the recently concluded G7 Summit in Biarritz, hosted by French President Emmanuel Macron .  The big stories out of G7, however, were from the bilateral discussions on the margins. One was the meeting between President Trump and Japanese Prime Minister Shinzo Abe on August 25, at which they announced the outline of a new bilateral trade deal. Agriculture, industrial tariffs, and digital trade are reportedly the key elements of the agreement, which the leaders expect to sign during this month’s meeting of the U.N. General Assembly. The dates for the UN meeting are September 17 to 30, with the high-level general debate set to begin on September 24. 

Where agriculture is concerned, the foreshadowed U.S.-Japan deal fits well into the theme of reducing inequalities. The Trans-Pacific Partnership (TPP) – now the Comprehensive and Progressive Trans-Pacific Partnership – entered into force on December 30, 2018, but without the United States. Consequently, some of America’s major competitors, countries like Canada and Australia, now enjoy better access to Japan’s lucrative market for agricultural commodities. So too do producers in the EU. The EU-Japan Partnership Agreement entered into force on February 1, 2019.  The promised U.S.-Japan agreement would re-level the playing field in Japan for U.S. producers competing with rivals from CPTPP and the EU.

Ned Moon is the chairman of the Idaho Wheat Commission, with concern and responsibility for the wheat producers of his state. Today’s featured quote is from a press release the Idaho Wheat Commission put out on August 26, the day following the breakthrough announcement by President Trump and Prime Minister Abe. Here is more of what he said:

NED MOON
“This trade agreement will benefit growers in Idaho by ensuring that the Japanese market remains open to wheat grown in the U.S.  Idaho growers have exported wheat to Japan for more than six decades. Japan typically sends a trade team to Idaho each year, and the Japanese flower mills particularly prefer soft white wheat, which is ideal for their sponge cakes and pastries.”

As for what is at stake, the Idaho Wheat Commission’s press release puts it this way:

“The agreement, which President Trump said could be signed at the United Nations General Assembly meeting in September, helps protect U.S. exports that represent about half of the Japanese wheat markets, with average annual sales of about three million metric tons that are currently worth about $700 million per year .”

COMMENT
If there is an agreement, it will affect more than wheat. Corn, pork, beef, wine – a host of agricultural products will be affected, and we expect to look at some of those in future entries. We’ll close this entry with three thoughts.

Something to Read . The first is a recommendation. Anyone looking for a quick take on what seems to have been achieved between the U.S. and Japan should read Wendy Cutler ’s August 29 op-ed in the Nikkei Asian Review. For years a senior USTR negotiator and now managing director of the Asia Society Policy Institute’s Washington office, Ms. Cutler is a clear-eyed analyst of U.S.-Japan trade. Her assessment of last month’s Trump-Abe announcement is fundamentally upbeat. “If successful,” she writes, “a U.S.-Japan trade deal would further solidify the close ties between the countries, while putting trade disputes in the rear view mirror.” At the same time she does not minimize the difficulties and puts considerable emphasis on the need for the United States and Japan to continue to work toward a more comprehensive agreement if, as expected, the deal promised for later this month is essentially limited to agriculture and some modifications in U.S. industrial tariffs.
An Aesthetic Confession . With some regularity – a couple of times a year – your editor has occasion to drive from Portland, Oregon, to Missoula, Montana. Our favorite route is through the Palouse, a beautiful stretch of rolling hills running through parts of Eastern Oregon, Washington, and Idaho. To a large extent, those hills are wheat field. Three of America’s top wheat growing states – Washington, Idaho, and Montana, are in this neck of the woods. And the kind they grow in Washington and Idaho, as Mr. Moon said, is ideal for cakes and pastries.
Japan Too Has a Problem . Agreements come about because they solve problems, not just for one participant, but for all of them. They may not be the same problems, though often they are mirror images of one another. We have talked a bit here about America’s problem. What is Japan’s? The challenge of protecting itself from future shocks – potential new, national security tariffs on automobiles, for example – is certainly part of it. 

More broadly, any seller needs to be concerned about the treatment accorded its best customers. And America is one of Japan’s very best customers, second only to China. As the table below indicates, the U.S. buys more from Japan than all of the CPTPP countries combined. 

COUNTRY IMPORTS FROM JAPAN IN 2018 IN $Billions
Australia
Brunei
Canada
Chile
Malaysia
Mexico
New Zealand
Peru
Singapore
Vietnam
All CPTT Countries
United States
17.1
0.0992
9.4
2.0
13.9
11.6
2.6
0.738
23.4
16.4
97.24
140.6
Now the U.S. is at a disadvantage vis-à-vis those countries when it comes to selling its products in Japan. Is that America’s fault because she decided not to participate in the new TPP? That is one view. It may be correct, but it doesn’t change much. Giving a raw deal to a top customer is a problem and blaming the customer is not a solution. An explanation perhaps but not a solution. No, for that there needs to be a new agreement.
SOURCES & LINKS
From the Idaho Wheat Commission is the press release from this Commission as published by Farm and Ranch. This was the source for today’s featured quote.

Helps Farmers, Staves Off Auto Tariffs takes you a Bloomberg story on the Trump-Abe meeting in Biarritz and their commitment to conclude an interim trade agreement this month.

Partnership with the EU is a link to a description of the EU-Japan Partnership Agreement as summarized by the European Union.

Challenges Remain is Wendy Cutler’s discussion of the anticipated agreement between the United States and Japan, which is discussed in the Comment Section above.

The Palouse is the Wikipedia article on this wheat growing region in America’s Northwest.

Japan’s Exports takes you to the page of World’s Top Exports. This was the source for the data in the table above.

The What and Where of Wheat is a U.S. map, published by U.S. Wheat Associates and showing the wheat growing regions of the United States and the kinds of wheat grown in each area.

Note. A Palouse Scene is a Shutterstock photo.




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