Japan Food-Supply Issues Raise Questions on Tariffs, Imports .

4/04/2011 15:41:49 PM

The disruption to food production in Japan, coupled with the questions about the country's food safety in light of possible radiation contamination, have raised the thorny question as to whether the country should scrap some of its protectionist tariffs on certain products and welcome more imports.

Those products would likely include milk, yogurt and rice, which are essentially 100% domestically controlled. Nearly three weeks after Japan's devastating earthquake and tsunami, those items are aren't readily available in stores countrywide.

Production levels at Meiji Holdings Co., Japan's leading producer of dairy products, have plummeted to 20% to 50% of pre-earthquake levels, mainly because of the rolling power blackouts in the Tokyo area. For yogurt in particular, which requires at least four to seven hours of consistent cooling while it ferments, the power outages—many of which still come on short notice—can wipe out a day's batch. The power outages will continue at least through the summer months, if not longer. In a normal year, Meiji churns out 320,000 kiloliters of yogurt.

A Meiji spokesman pointed to another pressing issue facing the company. It is having difficulty securing the packages for milk and yogurt, after the tsunami incapacitated some factories that make plastics that are used in containers. "We are not sure how long these disruptions will last," he said.

Many have started to ask whether the country will be forced to pry open its heavily protected dairy and rice industries to foreign competition.

"What is the dairy industry going to do, and [will the disaster] make them re-think the high import quotas and force a questioning of trade rules?" asked Scott Price, chief executive of Wal-Mart Stores Inc.'s Asian operations. "How do we balance food safety with the ageing [farming population] and what's happening now? Sometime shocks help the system re-evaluate."

For years, Japan has vowed to increase its food self-sufficiency. The country only produces 40% of the calories it consumes collectively, according to the ministry of agriculture, and it had targeted raising this figure to 50% by the year 2020. But with recent concerns about local food production, even a 50% self-sufficiency target seems like a difficult goal.

Government officials in Japan say it is far too early to judge whether the current crisis will force the country to shift its trade rules. "I think this could go either way; it's really difficult to discuss it at this point. Our task is to make this positive in the long run, and one of the ways to alleviate anxiety is to certify the distinct areas where food comes from," said one official at the ministry of trade.

Prime Minister Naoto Kan last week pushed back a June deadline on whether to join the Trans-Pacific Partnership talks—a wide-ranging trade agreement that aims to eliminate all tariffs within 10 years—given the situation in Japan.

Meanwhile, Japan's exports to China of milk with a long shelf life have been halted, though a ministry of agriculture official said these exports were too small to impact the industry in any tangible way.

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