Japanese rice and TPP

--The Asahi Shimbun, Dec. 20
EDITORIAL: Japanese rice and TPP

Prime Minister Naoto Kan's decision to consider Japan's participation in the Trans-Pacific Partnership (TPP) agreement has provoked acrimony over whether to protect Japan's export industries or its agriculture.

But this is not an either-or issue.

The TPP is a multilateral pact to create a free trade zone by eliminating tariffs between the member countries. Nine countries, including the United States, are negotiating the agreement.

Joining the TPP offers a great opportunity for Japan to catch up with some rival trade powers in the race to strike free trade agreements (FTAs).

Japan should try to figure out a way to ensure the long-term viability of its agriculture without missing out on this opportunity.

Agricultural reform is key

When South Korea's free trade agreements with the United States and Europe come into force next year, Japanese export industries will find themselves at a serious disadvantage against their South Korean rivals.

Japan's participation in the TPP pact would offset the negative effects. It would also help ease the pressure on Japanese companies to shift operations overseas.

As a resource-poor country, Japan has no choice but to stake its survival on trade. But food security is also vital for safeguarding the well-being of the people. Japan cannot give up either trade or agriculture.

The key to solving this knotty question is agricultural reform.

The farm ministry and agricultural cooperatives argue that Japan's participation in the TPP would deliver a devastating blow by bringing down its crucial protective wall--high tariffs. But Japanese agriculture should try to secure its survival and improve its future prospects through reform.

Since long before the TPP issue came to the fore, Japanese agriculture has been in urgent need of reform. The average age of farmers in Japan is 66, and there is a serious shortage of young people willing to pursue a career in agriculture. Japanese agriculture could collapse in 10 years or so.

One of the main factors putting Japanese agriculture in its current miserable state is the so-called acreage reduction program, which has been the main pillar of Japan's agricultural policy. It is the government's program to maintain rice prices through production adjustments, and it involves reducing the amount of land devoted to rice cultivation in response to declining demand for rice.

Seven trillion yen ($83.5 billion) of taxpayer money has been spent for the program in 40 years, but the average income of farmers has halved in the past two decades.

Its greatest harm is that it has hampered the efforts of well-motivated full-time farmers to become financially independent through ingenuity and expansion of their operations.

Food security under threat

Under the program, annual production quotas are decided on the basis of actual rice sales in the previous year.

The new program to prop up the income of farmers with direct cash payments, which was introduced this year by the government led by the Democratic Party of Japan as its key policy initiative, is making things worse.
Under the program, the amounts of cash that farmers receive are based on their production quotas. This has prompted agricultural cooperatives across the nation to try to increase rice sales by cutting prices in efforts to secure larger output quotas, thereby accelerating the falls of rice prices.

The situation is tougher for full-time farmers than for part-time farmers who get much of their income outside of farming.

The income support program is hindering consolidation of farming land and promoting the division of land into smaller lots.

Since the program covers all farmers selling rice, small farmers who were on the way out of the business are now rushing to terminate the lease of their farmland to others to receive cash from the government.

This is making it even more difficult to promote cost reduction through expanding the scale of farming.

Japan is struggling to curb rice production to prevent a glut. But the global outlook for the future of agriculture is quite different.

The world population is projected to grow to 9.1 billion in 2050 from the current 6.9 billion. Steadily growing demand for grain is certain to remain on a sharp upward trajectory in the coming years.

Fortunately, the kind of acute food shortage predicted by the British economist Thomas Malthus in his "An Essay on the Principle of Population" has not become reality, at least so far.

That's because cultivated acreage has been increased steadily while technological innovations for fertilizers and other means have raised production per unit area.

But what about the future? Even small changes in the supply-demand balance often cause sharp rises and falls in the grain markets. It is not rare either for food-exporting countries to cause international concerns about food supplies by trying to ensure sufficient supplies at home.

Three years ago, India and China imposed restrictions on their grain exports. This past summer, Russia temporarily halted its wheat exports, creating a stir among importing countries.

Many industrialized countries have been raising their grain production capacity in response to concerns about food shortages. That has been possible because of their export-promotion policies.

Germany, for instance, has achieved complete self-sufficiency in wheat and dairy products and is exporting the surpluses.

Japan has not taken that approach and has been cutting down its output. As a result, Japan's food self-sufficiency ratio has fallen to 40 percent from nearly 80 percent half a century ago.

A breed-improvement project to increase rice production has long been a taboo at agricultural experimental stations across the nation. This is an agricultural policy that is bucking the global trend.

End failed farm policy

Japanese rice, known for its high quality, has the potential to find customers among the swelling ranks of rich Asian consumers.

In a belated move, the farm ministry reached an agreement in early December with a Chinese state enterprise on Japanese rice exports to China. There is great hope for growth in Japanese rice exports to the fast-growing neighbor.

It is hard to believe that scrapping the prohibitive 778-percent tariff imposed on rice imports to open the door to foreign rice would drive Japanese rice out of the market.

The price differences between Japanese and foreign rice often cited by opponents of rice import liberalization have narrowed significantly. The price of rice produced in Japan is about 13,000 yen per 60 kilograms, while the price of rice imported from China, for instance, exceeds 10,000 yen, three times higher than it was 10 years ago.

Some large-scale farmers are distancing themselves from the stance of agricultural cooperatives, which are dead set against opening the rice market to imports.

A group of agricultural production corporations and large rice growers in Niigata Prefecture, a rice production center in Japan, has urged the government to swiftly make clear how Japan's participation in the TPP would change its agricultural policy over the long term.

"Simply opposing the TPP doesn't help revive Japanese agriculture," says one representative of the group.

The lack of a clear vision for the future of Japanese agriculture discourages young and highly motivated people from entering the business. The acreage reduction program, which runs counter to the efforts to brighten the future prospects of Japanese agriculture, should be abolished.

The direct payment program should also be revised to focus on supporting well-motivated full-time farmers from paying cash to all farmers selling rice.

Japan should outgrow the defeatist notion that agriculture is victimized by policy efforts to support export industries.

If Japanese agriculture is reinvented to make its products competitive in the global market, there is nothing for Japanese farmers to fear about trade liberalization.

by kiyoshimat | 2010-12-22 05:00 | 英字新聞

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