Japan and Tariff-Free U.S. Rice
In 2015, Japan proposed a set of 70,000-ton import quota for tariff-free U.S. rice. This quota is substantially lower than what the United States had demanded. The United States quota was 175,000 tons. Rice is one of the key issues remaining between Tokyo and Washington. Currently, Japan imports 770,000 tons of tariff-free rice on year. This is approximately 7 percent of the total amount of rice consumed. Of that volume, only 100,000 tons of rice is bought for actual consumption. The rest of the rice is designated for its use in food processing. The new proposal is set at 50,000-tons of tariff-free U.S. rice. This amount is to gradually increase to approximately 70,000 tons over a ten year period (The Japan Times). This paper analyzes the rice market and Japan and how their tariffs and quotas effect the global marketplace.
The United States is a major exporter when it comes to rice. The United States is concerned that Japan will not be able to meet the demand of rice in the United States. Also, the United States believes that setting up a quota does not necessarily increase exports. This is due to the face that Japanese consumers prefer domestic rice. This has caused U.S. rice to become less affordable for consumers. The United States believes that with the rice consumption falling throughout the world, setting a larger quota for imports could increase burdens when it comes to Japanese farmers. However, others believe that the United States has limited potential when it comes to the expansion of its rice market in Japan. This is due to the face that Japan is under free competition with their own rice. The Japanese stated, “The impact may be smaller if we drastically increase the import quota with no guarantee, rather than guaranteeing to import 50,000 tons” (Nikkei).
Having tariff-free rice imported into Japan from United States means that U.S. rice can be sold throughout Japan without the interference of the government. The United States has had a long interest in increasing the amount of exports to Japan with U.S. rice. However, Japan is less interested in the import. Originally the United States wanted 175,000 tons of rice to be tariff-free throughout Japan. However, Japan stated that was far too much and dropped the quota to 70,000-tons. Japan’s consumption of U.S. rice should be taken into consideration when considering this quota. Japan consumers prefer their own rice. Thus, 175,000-tons of U.S. rice would be considered too much for the country to consume. That would be approximately one-fourth of the amount of rice that is imported into Japan tariff-free each year.
If the quota is approved, then the American rice imports would boost while other countries are given little room to contribute to the rice industry. Japan only imports 100,000-tons of rice for consumption. The United States is asking for half of that with the ability for the quota to increase to 70,000-tons over a given amount of years. This decreases the amount of rice that is imported from other countries. While this may increases exports for the United States, it will decreases the amount of exports for other countries when it comes to the rice market and Japan.
Given the benefits, Japan is willing to help the United States boost their rice imports. However, only at a rate which is considered minimum access quota. In other words, Japan will help the United States boost their rice imports but will do so with the use of import quotas. Thus, the current issue is how much rice Japan is willing allow the United States to export. An increase in quota would be beneficial to American farmers, however, Japan believes it may be devastating for their farmers.
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If the importation of rice did have tariffs, then the rice trade industry would be different. Due to the fact that rice from the United States is an import, the prices for American rice will be lower than domestic products. Thus, the quantity produced must be lower as well. Tariff’s cause the price to increase. If the country attempt to implement a tariff, that tariff will cause a shift in the supply curve. Before tariff’s, a company is able to produce more quantities. This is due to the fact that the product’s price is often lower without a tariff. Once the tariff is introduced, on the other hand, the price for the import increases, causing the supply curve to move up the demand curve. As a result, the equilibrium of the supply and demand curve moves. In other words, equilibrium price goes up, while the quantity produced goes down. Thus, fewer products are produced and sold at a higher price. This is the direct result of tariffs in international trade.
The fewer imports that Japan allows into the country leads to fewer exports for another country. As a result, the world is losing when it comes to output. There are several reasons why a country may elect to have a tariff. One reason is due to the fact that tariff’s benefit domestic firms. It increases their market share throughout the country. However, consumers will pay higher prices for goods and services when tariffs are introduced.
In this case at hand, a tariff will decrease the amount of exports from other countries as well as increasing the cost of domestic rise. With tariffs, consumers pay more for their domestic goods and services. In Japan, the cost of domestic rice is several times larger than the world price. As a result, Japan’s production of rice will increase. However, domestic consumption of rice will decrease. This is a result of the increase prices for the good.
When it comes to tariffs and rice imports in Japan, a tariff will hurt Japan as a whole. Tariffs are designed to benefit the government and the producers of the product. The consumers, on the other hand, are harmed by the use of tariffs. The losses that are imposed on consumers strictly outweigh the benefits of the government and producers. Furthermore, rice tariffs effect the global market as well. If Japan decreases the amount of rice the import, there will be an excess of supply when it comes to rice throughout the world. As a result, the world price of rise will fall. This impacts the rest of the world and the global marketplace. By decreasing the amount of imports Japan allows in their country, both the domestic consumers and the global market place suffer.
Overall, Japan has a lot of control when it comes to the importation of rice from the United States. The U.S. has had a long interest in exporting their rice to Japan. However, the aspects of tariffs and quotas make it more difficult for the United States to fully integrate themselves in the Japanese market. Japan has an interest of protecting their own producers and farmers. Countries do this by limiting how many imports they allow from other countries. In order to do this, Japan limits how many imports they allow in their markets. For rice, Japan is setting that quota at 100,000-tons. In other words, Japan will purchase 100,000-tons of rice from the global marketplace. The United States wants to export over half of that to Japan. If Japan allows the United States that much room in their markets, then that lowers all of the other countries who export rice to Japan. If Japan allows the United States to export more rice to their market, then that lowers the amount of rice the rest of the world is allowed to export to rice. This puts the rest of the world at a disadvantage, especially the countries that are currently relying on rice exports to Japan. Given the strength of U.S. rice producers, Japan should hold quotas in order to keep the U.S. from monopolizing their market. This helps them protect their own market and their own producers. Tariffs, on the other hand, can end up hurting the world as a whole. Not allowing imports at all limits the global marketplace. It also decreases the world price of certain of the product, while increasing the prices of domestic products. This hurts consumers. Thus, the only individuals who are benefited from the use of tariffs are governments and producers.
Works Cited
Nikkei. “US Demands Japanese assurance on Tariff-free rice import quota.” Retrieved on 6 April 2016, from < http://asia.nikkei.com/Politics-Economy/International-Relations/US demands-Japanese-assurance-on-tariff-free-rice-import-quota>.
The Japan Times. “Japan pushes 70,000-ton quota for tariff-free U.S. rice.” Retrieved on 6 April 2016, from <http://www.japantimes.co.jp/news/2015/07/26/business/economy business/japan-plans-70000-ton-tariff-free-import-quota-for-u-s-rice/#.VwTeFxN96b9>.
