Twelve countries reached consensus on the details of a Trans-Pacific Partnership (TPP) trade agreement earlier this month. This agreement includes the U.S. along with Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. The TPP trade agreement is expected to boost the U.S. economy by reducing tariffs on over 18,000 American made products and increasing market access for small businesses. The agreement’s 30 chapters also include establishing environmental protection standards and enforcing the highest labor standards of any trade agreement in history. But how does the Trans-Pacific agreement benefit North Dakota? The answer has a lot to do with Japan.
Japan is the world’s 3rd largest economy, North Dakota’s 7th largest export market, and the largest TPP country with which we do not have a free trade agreement. If the Trans-Pacific Partnership successfully passes through Congress, North Dakota products will be able to enter the lucrative Japanese market at a much lower cost. According to the USDA, within 16 months 74% of tariffs on U.S. products going into Japan will be removed.
Included within these figures is U.S. wheat. Wheat is North Dakota’s top agricultural export, with $141 million exported in 2014. North Dakota wheat exported to Japan has been subject to high tariffs and restrictive tariff rate quotas. Despite this, Japan is the largest buyer of U.S. wheat. If TPP gains congressional approval, purchasing North Dakota wheat would be possible for many more Japanese buyers.
North Dakota beef producers can also consider themselves major benefactors of the TPP. Tariffs on beef imports to Japan and the other countries will be reduced immediately, with further tariff reductions over the course of 15 years. Japan, a major U.S. beef market, currently imposes a 38% tariff on U.S. beef products. TPP would include a 77% cut in tariffs for fresh, chilled, and frozen beef to Japan. This would create a level playing field for North Dakota beef producers now able to export their products at reduced rates.
Soybean farmers will gain favor as a result of this agreement, as well. Soybeans are North Dakota’s second largest agricultural export. Japan is the fourth largest export destination for U.S. soybeans. The country purchased $1 billion of soybeans last year, undeterred by tariffs as high as 20%. TPP will reduce these tariff rates and reveal new opportunities for soybean producers in Japan and other TPP countries.
In addition to Japan, Malaysia and Vietnam will be markets of interest in relation to TPP. U.S. wheat, soybeans, and vegetables will enter these two countries with zero tariffs – a significant development considering these two countries together total over 123 million people. TPP will strengthen the economies of its smaller members, including Malaysia and Vietnam. This can only benefit North Dakota as our customers are primarily the growing middle class in these countries.
According to the U.S. Trade Development Agency, TPP will also help American farmers and ranchers sell into TPP countries by ensuring that foreign regulations and agricultural inspections are based on science, eliminating agricultural export subsidies, and minimizing unpredictable export bans.
This is positive news for a state with 31,100 jobs supported by agricultural exports. TPP is undoubtedly in the interest of North Dakota agricultural exporters, though details of the agreement will not be known until the full text is released to the public. Negotiations have remained confidential in order to facilitate compromise and postpone public scrutiny until deal makers have debated the specifics. The agreement will become available for review for at least 60 days before Congress votes, and at that point North Dakota exporters can gauge their potential opportunities across the Pacific.