Japan, EU in sharp dispute over cheese

Japanese tariffs on cheese imports have become a major bone of contention in trade talks between Japan and the European Union, threatening to stymie efforts to liberalize the flow of goods and services between the two big markets.

Japan imposes tariffs of 22.4-40% on imports of Camembert, mozzarella and other cheese products imported from France, Italy and elsewhere in Europe. The EU, which produces half the world’s cheese, is demanding that Japan eliminate these duties. In return, Brussels is offering to scrap its tariffs on Japanese car imports.

But Japan’s Ministry of Agriculture, Forestry and Fisheries, which is in charge of negotiating over farm issues, is dead set against the proposal. The farm ministry’s recalcitrance is a big headache for colleagues at the Foreign Ministry, which is coordinating the broader talks. The roadblock over cheese could jeopardize Tokyo’s hopes for a quick deal.

Trouble on the farm

“This is shaping up as a test of patience,” said a midranking official at the Japanese farm ministry after top negotiators from both sides, meeting in Brussels in mid-January, failed to resolve the impasse.

The agriculture ministry is vehemently opposed to the EU proposal, fearing it may harm Japan’s dairy industry.

in the fall of 2015, Japan agreed in principle to gradual cuts in its tariffs on blue cheese and grated cheese in the negotiations for the Trans-Pacific Partnership trade agreement. But Japan managed to maintain its tariffs on more popular varieties in Japan, such as mozzarella, Camembert and processed cheese. Japanese agricultural policymakers feared that a flood of imported cheese would hurt the country’s dairy farmers.

If Tokyo makes bigger concessions to the EU over the issue, it will give U.S. President Donald Trump “an excuse” to criticize Japan, said a senior official at the farm ministry.

There are other domestic policy problems that make it difficult for Japan to give ground over cheese. In November, the government and ruling-coalition lawmakers decided to revise the subsidy program for domestic milk producers. Under the current system, producers can receive subsidies only if they sell raw milk to agricultural cooperatives. The revision scraps this restriction, letting dairy farmers sell to other organizations and still receive payments.

The change is aimed at promoting competition among wholesalers, giving farmers opportunities to sell their products at higher prices. The move has enraged agricultural cooperatives, which will lose their monopoly over the supply of raw milk.

A senior official at the farm ministry, which is dealing with the sticky task of balancing the conflicting interests in the industry, said: “Our hands are tied with the raw milk reform. If we make a concession over the cheese tariffs, the credibility of our policy will be lost.”

Sour over milk

The EU has its own reasons for refusing to compromise. In 2015, it abolished the milk quota system, which was aimed at preventing overproduction. Lifting the production caps was designed to allow European dairy farmers to export more to markets where demand is growing.

But Europe’s relations with Russia, an important overseas market for European dairy products, have been strained by Moscow’s seizure of Crimea from Ukraine in 2014, and its support for separatist rebels there.

The EU slapped Russia with economic sanctions in response, halting exports of milk to the country. That led to a glut in the domestic market, pushing raw milk prices down for 26 straight months through October last year.

European dairy farmers have staged dramatic protests against the EU’s policy, spraying the European Parliament in Brussels with milk, for example.

At a meeting of European dairy companies held in June 2016 in Dublin, an EU agricultural official promised to promote exports of dairy products to mop up the excess milk in the domestic market.

Japan is wary of the EU’s drive to boost exports. “The EU considers Japan to be a market that should gulp down European milk,” said a Japanese trade negotiator.

But the battle between Japan and the EU over cheese has much bigger economic implications. Amid a growing global trend toward protectionism, epitomized by Trump’s “America First” trade policy, the prospective free trade agreement between Japan and the EU is a beacon of hope for those who favor trade liberalization.

If the talks bog down over a single product like cheese, Japan could be swamped by a protectionist wave.


Source: AsianReview

Link: http://asia.nikkei.com/Politics-Economy/International-Relations/Japan-EU-in-sharp-dispute-over-cheese


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