Canada’s agriculture exporters have enjoyed unanticipated advantages in Japan after the U.S. decided to quit the Trans-Pacific Partnership.  However, this month, the U.S. and Japan signed what is being termed a “partial” trade agreement that is expected to come into effect on January 1. For the Japanese market, the deal essentially gave the U.S. back some of what they lost when they left, and a lot of what Canada had gained under the Progressive Agreement for Trans-Pacific Partnership (CPTPP).

This is bad news for Canada. But, it’s not the end of the world. The agreement will pose several difficult but not insurmountable challenges for Canadian business and policy makers in the Pacific Rim. The immediate challenge is to defend gains made in the Japanese market from the return of a wounded and more aggressive United States agricultural sector.

If Canadian businesses and export promotion agencies can move quickly to focus efforts on advantages it still has over the U.S. in Japan, it can still do well. Doing so will also better prepare Canada to be more competitive in other CPTPP markets if the U.S. signs bilateral deals with other CPTPP members.

Comparing Japan’s CPTPP tariff schedule with that of the U.S.-Japan trade agreement, we’ve identified specific advantages and competitive threats for Canadian exports to Japan.

The Japanese tariff concessions under the deal are almost exclusively in agricultural goods[1]. This is bad news. Canadian agricultural exports are the key winners in the Japanese market from the CPTPP deal. Specifically, some of the key exports impacted by the U.S.-Japan trade agreement are pork, wheat, barley, beef and potatoes.


Table 1: Latest performance of Canadian agricultural exports to Japan under the CPTPP that will be exposed to US competition under U.S.-Japan trade agreement

HS4 level goods (Value in thousands of U.S. dollars) 2017 2018 % change 2017-2018 Jan-Aug 2018 Jan-Aug 2019 % Change 2019/2018
HS 0201 – Beef – Fresh or Chilled 21,071 43,135 104.71% 25,407 58,097 128.70%
HS 0202 – Beef – Frozen 54,058 76,266 41.08% 54,297 80,031 47.40%
HS 0203 – Pork – Fresh, Chilled or Frozen 858,290 888,692 3.54% 587,265 628,903 7.10%
HS 1003 – Barley 32,200 54,916 70.55% 16,232 46,839 188.60%

Canada has done especially well in Japan taking agricultural market share from the Americans. Pork was one of the largest Canadian export goods to Japan before the CPTPP and has seen substantial growth since the CPTPP came into force. Fresh or chilled boneless pork (HS 020319), for example, was Canada’s fifth largest export (at the HS 6-digit level) to Japan with C$892 million in 2018. Furthermore, we estimated a potential total Canadian gain of 204.9% with Japan under the CPTPP before the U.S.-Japan trade agreement. This opportunity has been a welcoming relief for Canadian pork exporters in light of trade actions and market developments in China. But this will no longer be the case as U.S. will share the same tariff benefits as Canada for pork with Japan (Table 2).


Table 2: Japan’s tariff schedule comparison under the U.S.-Japan trade agreement and the CPTPP for fresh or chilled boneless pork (HS 020319)

Annual stages Japan tariff schedule for U.S. Annual stages Japan tariff schedule for Canada (CPTPP)
Year 1 125 yen/kg or 2.2%
Year 1 125 yen/kg or 1.9% Year 2 125 yen/kg or 1.9%
Year 2 125 yen/kg or 1.7% Year 3 125 yen/kg or 1.7%
Year 3 125 yen/kg or 1.4% Year 4 125 yen/kg or 1.4%
Year 4 70 yen/kg or 1.2% Year 5 70 yen/kg or 1.2%
Year 5 66 yen/kg or 0.9% Year 6 66 yen/kg or 0.9%
Year 6 62 yen/kg or 0.7% Year 7 62 yen/kg or 0.7%
Year 7 58 yen/kg or 0.4% Year 8 58 yen/kg or 0.4%
Year 8 54 yen/kg or 0.2% Year 9 54 yen/kg or 0.2%
Year 9 50 yen/kg or 0% Year 10 50 yen/kg or 0%

Extensive goods, or the less-obvious, previously smaller volume Canadian agriculture exports to Japan, such as beef, barley and potatoes have all seen tremendous growth (see Table 1). Between 2017 and 2018 alone, fresh or chilled beef has seen growth of 104.71% and barley 70.55%. But now, the U.S. will also share the same tariff reduction schedule as Canada for Japan (see Table 3). Year one of tariff cuts for pork, wheat, beef and potatoes for the U.S. matches that of the year two tariff cut for Canada with Japan under the CPTPP. Given how hard American agriculture has been hit by the country’s trade wars U.S. exporters will move aggressively.


Table 3: Japan’s tariff schedule comparison under the U.S.-Japan trade agreement and the CPTPP for other agricultural goods

HS4 level goods Japan tariff rate comparison between US and CPTPP
HS 0203 – Pork – Fresh, Chilled or Frozen Same; at HS 9-digit level, Japan has tariff reduction for U.S. that does not exist under CPTPP: HS0203.19.024 and HS0203.19.025
HS 1001 – Wheat Same
HS 1003 – Barley Same
HS 0202 – Beef – Frozen Same
HS 0201 – Beef – Fresh or Chilled Same
HS 2004 – Potatoes Same

Nevertheless, there is some good news for Canada. The agreement does not cover the 24 other areas in the CPTPP including dispute resolution. In addition, not all agricultural exports are affected. Canadian seafood exports to Japan will not be impacted and are expected to continue to see high growth. For example, Crustaceans (HS0306) is ranked top 15th in Canadian export to Japan at the HS 4-digit level with C$124 million and 43% of Canada’s total seafood export to Japan in 2018. Furthermore, specific fish products in which we estimated to have total growth of 39.1% to Japan under the CPTPP are not exported between U.S. and Japan.

Finally, thankfully we export a lot more to Japan than agriculture.  This still leaves everything else as an area of potential advantage for Canadian firms in Japan such as lumber and bitumen exports – which will not be impacted. But Canada needs to move aggressively to lock down these advantages before the U.S.-Japan trade deal is expanded.




Sharon Zhengyang Sun is a PhD student at NPSIA and trade policy economist at Canada West Foundation

Carlo Dade is the director of the Trade & Investment Centre at the Canada West Foundation

Image courtesy of Wikipedia

The views expressed in this article are the author’s own and do not necessarily reflect iAffairs’ editorial stance.

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