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Japanese rice lobby choking progress of TPP deal with US

TOKYO — A powerful lobby stands in the way of two of the world’s biggest economies completing a trade deal: Japanese rice farmers.

A Japanese farmer planting rice. Rice is a symbol of self-sufficiency in Japan. Photo: Reuters

A Japanese farmer planting rice. Rice is a symbol of self-sufficiency in Japan. Photo: Reuters

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TOKYO — A powerful lobby stands in the way of two of the world’s biggest economies completing a trade deal: Japanese rice farmers.

Rice is the island-nation’s staple grain and a powerful symbol of self-sufficiency. It is also among the thorniest issues holding up an agreement the two nations hope to unveil when Japanese Prime Minister Shinzo Abe and United States President Barack Obama meet in Washington next week.

“Rice is a social and political force. There is nothing quite like it in the US,” said Mr Tom Slayton, a former senior rice trade analyst at the US Department of Agriculture, who implemented an earlier US-Japan rice agreement in the 1980s. “The Japanese are protecting a dinosaur, but it’s a dinosaur with a lot of clout.”

Negotiators have been working for months on a deal that could become a part of a global settlement being hammered out among 12 Pacific countries. The so-called Trans-Pacific Partnership (TPP) would link economies making up 40 per cent of the world’s gross domestic product and strengthen US alliances in Asia — key trade and foreign policy goals for Mr Obama.

If the US, the world’s biggest economy, and Japan, the third-biggest, can strike a bilateral deal, it would help pave the way for the larger accord.

Motor vehicles and agriculture have become the final snags. Japan wants the US to eliminate a US import tariff that was put in place to protect an industry that supports 900,000 manufacturing jobs. US farm groups want Japanese trade restrictions lifted — including for rice — further opening a market that is already the biggest buyer of US beef and pork.

LARGE MARKET

The US was Japan’s largest export market and second-biggest source of imports in 2013, the most recent government data showed. Last year, the US sold US$67 billion (S$90.2 billion) of goods to Japan and bought US$133.9 billion worth. The US is the world’s fifth-biggest exporter of rice, trailing Thailand, India, Vietnam and Pakistan. Japan, where the grain has been culturally and economically important for millennia, imports almost none.

“The Japanese have always been very, very tough negotiators on agriculture issues. We’ve made progress, but rice is one of the fences that are still up,” said Mr John Block, who served as US Agriculture Secretary under President Ronald Reagan.

Mr Hiroshi Oe, Japan’s TPP Ambassador, said rice is considered a politically sensitive product that must be protected, along with other grains, beef, pork, dairy and sugar crops. Japanese Economy Minister Akira Amari said this week that rice is 100 times more important to Japan than the US.

Part of Japan’s hesitancy to change its rice policy comes from the lobbying power of its farmers. The nation’s union of farmer cooperatives, JA-Zenchu, has enjoyed special status since shortly after World War II, growing from an organisation that fended off famine to a politically connected conglomerate that distributes farm supplies, sells agricultural products and dominates rural lending.

With nearly 10 million members, its influence on the ruling Liberal Democratic Party (LDP) has long kept farmers protected from the consolidation, displacement — and efficiency — of globalisation. That has created a domestic market in which Japanese rice reigns supreme. Imports, begrudgingly allowed in a quota system agreed to under the World Trade Organization, remain unsold and unwanted. The Pacific trade accord might change that.

Japan bought 288,471 tonnes of rice, worth US$272 million, from the Western superpower last year, US trade statistics showed. “Japan is poised to increase rice imports, which is different from freeing up the market entirely,” said Mr Masaki Kuwahara, an economist at Nomura Securities in Tokyo. “I don’t expect the US and Japan to sacrifice the TPP deal because of their disagreement over rice imports. Both governments basically agree that Japan must increase rice imports from the US for the deal.”

Japanese farmers have pressured the government to reject an agreement, with JA-Zenchu organising rallies against a deal across the country. The group has become a leader among Japan’s globalisation sceptics, said Dr Koichi Nakano, professor of politics at Sophia University in Tokyo.

Still, signs are already evident that rice’s grip is weakening as Mr Abe pushes for structural reform in Japan’s economy. The LDP in February announced plans to revise Japan’s agricultural cooperative law to deprive it of the ability to supervise and audit local farming groups, a move designed to dilute JA-Zenchu’s power and cut the fees it collects from members.

The government also has eased curbs on corporate farm ownership and created land banks to merge small holdings into large tracts, a way to wring inefficiencies out of a system still populated by ageing farmers tending small plots of land. The nation has set a goal of doubling food exports by 2020, with beef exports surging fivefold.

Mr Akira Banzai, chairman of JA-Zenchu, resigned earlier this month, saying reforms would be needed under a new chairman. Japan has already given some ground on TPP, agreeing to lower beef and pork import tariffs, products for which Japan is already the biggest importer of US goods.

In the end, the stumbling block is surmountable amid the emotion enveloping the issue, said Dr Jeff Kingston, director of the Asian Studies programme at Temple University’s Tokyo campus. “The Japanese public is easily aroused over rice because it is intrinsic to national identity, but figuring out a mechanism that would crack open the market a bit more is doable,” he said. “There will be a lot of grandstanding on this issue, but it is too marginal to scupper a deal that both sides want as much for geopolitical reasons as for economic benefits.” BLOOMBERG

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