The stakes were high for the U.S. potato industry as international trade negotiators packed their suitcases for the 18th exhaustive round of Trans Pacific Partnership (TPP) negotiations, in Malaysia in July.
U.S. potato exports to TPP negotiating countries (Australia, Brunei Darussalam, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam) are valued about $1 billion annually. Should the trade pact be finalized, as the Obama Administration hopes will happen by the end of the year, the door would open for increased exports of American-grown potatoes and potato products.
While TPP represents a tremendous opportunity for the U.S. potato industry, NPC, USPB and our state allies are pushing to add another chair to the negotiation table for our most important trading partner: Japan.
As the single largest export market for U.S. potatoes, Japan's inclusion to TPP would provide a welcomed shot-in-the-arm to our industry, which already ships one-fourth of its exports to that country.
In 2012, over $400 million worth of U.S. potato products were exported to their market. The vast majority of these were processed products including frozen fries and dehydrated potatoes, but in recent years, exports of fresh chipping potatoes for immediate processing in Japanese potato chip factories has also grown.
The potato industry has communicated to our government two priorities they should consider for the upcoming negotiations: the immediate elimination of Japanese tariffs on potato products; and the opening of market access for U.S. fresh potatoes.
Elimination through the TPP of Japan's potato tariffs, which range from 4.3 percent on fresh potatoes to 20 percent on dehydrated potatoes, is a high priority for the U.S. potato industry. Although Japan's tariff levels are lower than some developing countries, the sheer volume of trade in U.S. potatoes means significant duties are paid to the Japanese government each year on potato imports.
Immediately eliminating the Japanese potato tariffs will result in increased exports of U.S. potato products to Japan, ensure continued strong U.S. market share and create greater access to high-quality U.S. potato products for Japanese consumers.
The other reason to eliminate these tariffs is competition. On March 25, 2013, the European Union and Japan launched their free trade agreement negotiations. While these talks will likely take several years, they are expected to result in the elimination of Japanese tariffs on European potato products.
Sales in frozen potato products can hinge on pennies per pound. Should European product gain even a small tariff advantage over U.S. potato products, the current dominant U.S. market share in Japan will be quickly eroded. With competitor countries such as the EU seeking a free trade agreement with Japan, it is important that Japanese potato tariffs are eliminated in the TPP to maintain current U.S. market share.
For many years the U.S. potato industry has sought fresh potato market access to Japan. With its developed economy and large population, opening the Japanese market would have a huge impact on the U.S. potato industry. Should the Japanese market be opened for all U.S. fresh potatoes, we estimate that exports could reach $50 million annually within five years, and much more than that over time.
Unfortunately, despite repeated efforts over the last 20 years, the Japanese government has not seriously engaged in fresh potato market access negotiations with the United States.
After years of no progress on the fresh potato request, in 2006, USDA, working with the U.S. potato industry, negotiated the limited opening of the Japanese market for U.S. fresh chipping potatoes that would be immediately processed into potato chips upon arrival in Japan. Although the industry welcomed this development, and this chipping potato market has grown into a $10 million annual market, the industry has always considered chipping potato access a stepping stone to our true goal: opening the Japanese market for all U.S. fresh potatoes.
While the U.S. potato industry understands these priorities are challenging, the TPP is a timely vehicle for addressing these important issues, and we look forward to working closely with our U.S. trade negotiators to turn them into reality.