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Sticky situation for Japan 's rice policy
BIOX, 20.04.2006
The roots of Japan 's association with rice run deep. The Japanese emperor still performs a number of traditional Shinto ceremonies to bless and protect the rice crop each year, and guarding rice has been a key political function of governments from the feudal times into the present. But Japan 's rice policy is likely to come under increasing international criticism over the next few months, as the country is a major symbolic bastion of overt protectionism which is thwarting the ambitions of World Trade Organization (WTO) nations negotiating for greater market access for their agricultural products.

WTO members are holding meetings this week in Geneva that aim to reach a preliminary accord by July 31 on reducing trade barriers that protect sensitive agricultural products. Any failure to reach consensus would dash hopes of inking a final accord at Doha development agenda negotiations in Hong Kong in December. While some progress toward agreement was seen at meetings in Dalian , China in mid-July, the sticking point that nobody wanted to mention was Japan 's rice policy.

Rice has long been one of Japan 's most protected domestic markets. A combination of restricted market access, high tariffs, and farming support via subsidies and production controls contributes to a situation in which the Japanese consumer pays around 12 times more per kilogram of rice than US consumers. While often criticized as an unfair burden on the Japanese consumer, more people in government are now beginning to realize that Tokyo has gone out on a limb with its rice policy and that the nation's notoriously inefficient rice farmers can't continue to be supported forever.

In 2004 alone, the Japanese government is said to have spent some Y5.283 trillion (US$47 billion) on support for the farming sector, at a time when Tokyo is striving to reduce public expenditure in other areas and hiking taxes. A recent OECD (Organization for Economic Cooperation and Development) report recently showed that around 1.4% of gross domestic product (GDP) goes toward agriculture support in Japan , and that a massive 80% of rice farming receipts are derived from government payments.

Increasingly isolated Japan accepted the introduction of minimum market access for foreign rice in 1995 under the GATT Agriculture Agreement; this was supposed to bring imports to 8% of domestic consumption by 2000. But in April 1999 the government adopted a tariff rate quota (TRQ) system whereby minimum access is kept just below 8%, and imports beyond the quota are subject to such prohibitively high tariffs that more foreign rice is effectively stopped from entering the market.

This system, sometimes called "dirty tariffication", currently allows an annual import quota of 682,000 tons of rice and rice products, which corresponds to 7.2% of average consumption in the 1986-88 base period. Imports of rice beyond the quota are unrestricted in legal terms but subject to a Y341 per kilogram tariff. This tariff is now estimated at 490%, but the rate will soar to massive 778% under new calculation rules to be introduced as part of the Doha Round.

Europe and the US have both opted for more orthodox subsidy payments to farmers and are in the process of gradually reducing them, leaving Japan increasingly isolated on the issue of maintaining super-high barriers at the border as a method of protecting its agriculture sector from foreign competition. Perhaps the only country that Japan could expect sympathy from is South Korea , which similarly coddles its rice farmers, forcing Koreans to pay three times more per kilogram of rice than Americans.

But Tokyo is almost certain to oppose other parts of the G20 proposal, such as capping tariffs at 100%. It is possible a special exception will be made for rice due to its sensitive status in order to prevent any derailment of negotiations in Hong Kong , but the July Package states that even for sensitive products the principle of substantial improvement through TRQ commitments and tariff cuts applies. As such, Japan may have to lift its minimum market access to more than 682,000 tons of rice and rice products. It may also have little option but to substantially cut the beyond-quota tariff on rice to allow more foreign rice to enter the domestic market, or risk throwing the negotiations into chaos.
MGR Archive 21.4.2006
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