By Brendan Pearson in Tokyo

The beef industry is facing a new threat as its largest export market, Japan, prepare to impose punitive tariffs on the $1.5 billion Australian beef trade.

The action, likely to start from August1, will increase the tariff on beef exported to Japan from 38.5 per cent to 50 per cent. It will apply until April 2004.

The protectionist measure is designed to curb Japan’s beef imports, which are beginning to recover after slumping dramatically last year following the bovine spongiform encephalopathy disease scandal in Japan in September 2001.

Under sweetheart World Trade Organization arrangement, Japan is allowed to impose the tariff on all beef imports once they rice by 17 per cent in one quarter compared with the same quarter the previous year.

In the first six months of last year, beef exports to Japan fell 42 per cent, reducing the trigger level for safeguard duties.

Japan absorbs about half Australia’s beef exports, and the move has incensed the federal government, which had launched a concerted lobbying effort to defeat the measure.

Japan’s action is another blow to the local $6 billion cattle industry, which is already suffering from one of the worst drought on record and high feed prices.

The drought has compounded the disruption to exports caused by BSE (or mad cow disease) in Japan and the triggering of beef import quotas in the United States.

The move has also drawn fire from the Japan Food Service Association, which represents the restaurant and catering sectors which account for 50 per cent of beef consumption. Japan’s food service sector is worried that these price increased will hit its members hardest, adding 11 billion yen to its costs alone. It is questionable and irrational, JFSA spokesman Kunio Chiba said yesterday.

ABARE estimates the duties will impose costs on Japanese consumers of about 31 billion yen.

Australian Financial Review

16 January 2003

Question

1.      Use a supply and demand model to explain how the trade in beef benefits both Australia and Japan.

2.      Explain why the tariff duties could cost Japanese consumers around 31 billion yen.

3.      Why would Japan want to impose a punitive tariff on Australian beef? Who gains from the tariff?

4.      Why might Australian rock lobster exporters be better off as a result of the Japanese tariff on Australian beef?

5.      Use an appropriate economic model to describe how the tariffs will affect costs in Japan’s food service sector, and explain why firm in the sector are worried by the expected increase in tariffs.

6.      The United States also protects its beef industry from competition from Australian beef exports but it uses import quotas.

a.       Does it make much different to  the Australian beef exporters whether the importing country is using tariffs or quotas to limit imports?

b.      Is it possible that the import quotas will have the same effect as tariffs for the importing country?

Case Study: Japan Tariff Hits Beef Exports