Japan-EU trade deal could hurt U.S. dairy farmers

Zlati Meyer

Forget sushi. The Japanese may soon be ringing up more pizzas. 

A new Japan-EU trade agreement could hurt U.S. dairy exports.

A new trade deal with the European Union will make it cheaper for Japan to import dairy products. That means mozzarella from Italy, feta from Greece and cheddar from Ireland. 

But it will likely be bad news for American cows.

Until striking the deal Thursday, Japan slapped a whopping 29.8% duty on hard cheeses, such as gouda and cheddar.

The EU-Japan Economic Partnership Agreement, which addresses a variety of industries, eliminates the hard-cheese tax and establishes a tax-free quota for fresh cheeses, like as mozzarella.

An expected increase in European cheese products sold in Japan following the trade deal could mean heightened competition and less demand for American products. And less demand could lead to lower prices.

Japan is the United States' third-largest export market for cheese, according to the U.S. Dairy Export Council, an Arlington, Va.-based trade association representing U.S. dairy farmers and processors.

"The EU and Japan will have lower taxes between themselves on dairy imports going to Japan from the EU," said Bob Young, chief economist for the American Farm Bureau Federation. "The EU will be able to send more products into Japan than before."

Previously, U.S. milk producers selling their merchandise to Japan had been banking on their financial interests protected by the Trans-Pacific Partnership, a preliminary 12-nation trade agreement that had been signed by former President Obama. The deal, whose members included the U.S. and Japan, was scrapped by President Trump on his first full day in office.

The TPP's demise gave the EU a chance to give a leg up to its dairy farmers as it pursued a separate treaty with Japan. 

"Limits in exports ultimately flow back to farmers through lower returns," said Shawna Morris, vice president of trade policy at the U.S. Dairy Export Council. "It gives certain European products a leg up at our expense."

She's also concerned about geographical indications, rules that require products to come from a particular area in order to be called a certain name. For example, an EU-Korea trade agreement requires that any cheese called feta originate from Greece.

The EU-Japan agreement established geographical indications for more than 200 foods, including Roquefort, a French blue cheese. The limited options in naming could mean competitive disadvantage for American blue cheese producers.