European agri-businesses step up investment to capitalize on EU-Japan trade deal

The first bilateral framework agreement between the two regions is set to benefit EU agri-food exports.

Good opportunities for Danish pork will emerge from the trade deal between the EU and Japan approved by European Parliament this week, international meat processing giant Danish Crown told Agri Investor.

“We have invested in anticipation of the agreement, employing another 100 people to work on a brand new product line for pork targeted specifically at the Japanese market. We have also enlarged another one of our factories to reflect the good opportunities which will arise from this agreement,” said Jens Hansen, head of press at Danish Crown.

“When the deal was first reached one-and-a-half years ago, we saw it as a great opportunity and estimated that it would create another 300 jobs,” he added.

Danish Crown – the world’s largest pork exporter, employing around 26,000 people – sends 70 percent of Danish pork exports (more than 100,000 tons) to Japan and has been sending it for more than 40 years. “The impact on our exports will, nevertheless, be gradual as tariff reductions for pork will be gradually reduced over time,” Hansen said

The trade deal with Japan – the EU’s fourth biggest market for agricultural exports, worth €5.7 billion – is set to come into force in February 2019.

“I am extremely pleased with Parliament’s vote. Our economic partnership with Japan – the biggest trade zone ever negotiated – is now very close to becoming a reality,” said Cecilia Malmstrom, EU commissioner for trade. While MEP Christophe Hansen hailed it as “blueprint for future agreements.”

The main exports are pork, beef, cheese and wine from Europe, where tariffs will be cut. “It is a positive development for European farmers and food companies,” Roberto Viton, managing director at Valoral Advisors insisted.

“It is important, given that Japan is a net importer of most food staples due to its large population and its relatively limited agricultural resources. The country has a net agricultural trade deficit of around $50 billion and it has, indeed, one of the lower food self-sufficiency ratios among the Group of 20 major economies,” he explained.

“While it is debatable how much export volumes for these products can increase in the near future, the agreement is a positive step to make European products more accessible and affordable to Japanese consumers. It’s a refreshing sign in times of protectionism talks around the world,” added Viton.

In the bilateral framework agreement, the minimum entry price for pork – the main agricultural export to Japan – will be gradually dismantled. Tariffs will also be steadily reduced for beef from 38.5 percent over 15 years. There will be full trade liberalization for hard cheeses such as gouda and cheddar, which are currently taxed at nearly 15 percent, the EU Commission said. A duty-free quota will also be created for fresh cheeses such as Mozzarella, as well as increased tariff-rate quotas for other dairy produce.

For wine, currently worth around €1 billion in exports to Japan, there will be full trade liberalization immediately. The 15 percent tariff will be scrapped from day one as well as for other alcoholic drinks, meaning big export opportunities for EU wine, the Commission stressed. Tariffs on all wood products will also be fully eliminated, while import quotas in the fisheries sector will be removed.

Farmers, agri cooperatives and food businesses from across Europe released statements welcoming the deal this week. “It’s a good agreement for Spain. Japan has 120 million people and doesn’t produce olive oil, pork, wine, fruit and vegetables such as oranges, which Spain is a big producer of. We will export a lot thanks to this agreement,” said Juan Corbalan, head of the Brussels office of Cooperativas Agro-Alimentarias.

However, rice – the main Japanese concern in the talks – is completely excluded from the agreement after intense lobbying by the Japanese Central Union of Agricultural Cooperatives.