US Japan trade deal levels beef playing field

The US Office of Trade reported a deal was reached with Japan involving agriculture, industrial goods and the digital trade. Tariffs on fresh and frozen beef and pork from the US would be reduced.

Analysts said the deal could be effective as early as January and is believed to give the US the same arrangements on beef as countries in the Trans-Pacific Partnership Agreement signed last year.

Australia currently holds an 11.9 per cent advantage over the US and that was set to widen, with the eventual level of tariffs on beef imports settling at 9pc within 16 years under the TPP. Countries like Canada, New Zealand and Mexico have the same schedule, leaving the US (President Donald Trump pulled out of the TPP) at a lonely 38.5pc.

Australia and the US account for the vast majority of imported beef in Japan and until recent months when China took the title, Japan had been our largest market on a volume and value basis.

It was worth more than A$2.4 billion last year, with more than 300,000 tonnes shipped.

Agriculture analyst with Rural Bank Michael Curtis said Australia had a 48pc share of the Japanese market for 2019 year-to-date but the US was close behind at 40pc.

Despite the tariff advantage, Australia had been losing market share to the US since it regained access after being shut out in 2013 due to mad cow disease, he said.

Australian analysts agree Australian beef was very likely to be displaced as a result of the trade deal but all were adamant Australia never expects an unfair advantage over other nations.

Mr Curtis pointed out the deal co-incides with the forecast of lower supply from Australia while the US sits at the top of its herd expansion cycle and has record volumes to export.

The US will effectively be able to supply a consistent product in line with what Japanese consumers are wanting at a more competitive price, he said.

Mr Curtis also felt there was a real possibility once the US established greater market share in Japan it would be difficult for Australia to recapture it in the longer term.

"There is, of course, still plenty for Australia to be positive about in regards to global beef demand - this is just one story on the more cautious side of the outlook," he said.

Meat & Livestock Australia's international business manager for Japan Andrew Cox said price wasn't the only thing delivering benefits to Australian beef in this market.

Speaking earlier this year as the trade talks between Japan and the US played out, Mr Cox said Australian beef continued to focus on building its brand and maintaining the high level of loyalty it enjoyed in Japan.

"We're the most popular among Japanese consumers in terms of key perception measures. We're highly trusted and considered the highest quality compared to other importing nations," he said.

"It's critical we maintain this status."

He also explained there were some areas where Australian and US beef did not tend to compete.

Australia supplies most of the large hamburger chains, while the US supplies large food service chains with certain cuts like short plate, for example. However, on restaurant menus and supermarket shelves, millions of Japanese consumers are making a choice every day between Australian and US beef.