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Japanese Agricultural Policy: Last Chance for Change

Tags: TPP , Farming , Agriculture , Trade , Politics

Banno, Yuko (2010-14)

May 12, 2014

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Domestic political concerns—particularly the importance of the farm vote—have hitherto tied the hands of Japanese negotiators in international trade talks, forcing them to make substantial concessions to maintain nominal safeguards, as during the Uruguay Round. Recent changes of government and growing awareness of the need for reform, notes Yuko Banno, though, have prompted a serious rethinking of Japan’s farm policy.

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Despite reports of progress in the Trans-Pacific Partnership negotiations in April 2014—between Japan and the United States during President Barack Obama’s state visit to Tokyo—and the February 2014 ministerial-level meeting in Singapore, the political situation in each of the parties to the talks means there are likely to be many more twists and turns before an agreement is reached.

For many years Japan has been considered a poor negotiator. Additional support for this view is contained in a policy report examining Japan’s response to the Uruguay Round talks, recently published by the Tokyo Foundation. During those negotiations under the General Agreement on Tariffs and Trade, Japan spent so much energy trying to block the tariffication of rice that it ended up paying a higher “price” in the form of an increase on minimum access quotas for rice. This was a hollow victory for Japan: one that entailed more loss than gain.

It goes without saying that in any international negotiations, it is important to secure real gains based on a careful consideration of the national interest. Discussions of trade and commerce policy in Japan are often framed in terms of “tradeoffs” that seek to minimize the negative impact on Japanese agriculture. What is needed, instead, are negotiators who can make calm and rational decisions that serve the national interest while at the same time guaranteeing a strong foundation for the nation’s food supply.

It is instructive to compare Japan’s attitude during the Uruguay Round negotiations with the European approach. The European Union implemented a set of regionwide reforms and succeeded in taking the initiative during the round by completing the necessary reforms before a binding agreement was reached. It was at this time that the EU introduced a bold new policy of direct subsidies to farmers. This had a huge impact on subsequent agricultural policy.

By contrast, Japan stubbornly clung to its position of blocking tariffication. Further, when a post-agreement compensation package for farmers was being drawn up, attention was narrowly focused on its total size, with little attempt being made to clarify exactly how the Uruguay Round agreement would affect Japanese agriculture. The package, moreover, was a mere rehashing of existing programs. On the domestic front as well, Japan missed an opportunity to achieve real, substantive progress.

Stirrings of Change

The Uruguay Round negotiations and the subsequent domestic policy measures were recently reviewed by the Tokyo Foundation’s project on Agricultural Policy in a Globalizing World in order to shed light on what to prioritize—and what to avoid—in the TPP talks today. The findings have been shared broadly with members of the media and individuals involved in agricultural policy, including a number of key policymakers in government and the ruling coalition. What are the most important lessons of the Uruguay Round? And what are the issues that need to be borne in mind as the government formulates its farm policies going forward?

These discussions have revealed that Japan is at a turning point, ready to move beyond the stopgap and symptomatic response that has marked the government’s approach to agricultural policy to date. Some people may contend that this is a case of “too little, too late” and that there is a real danger that the lingering stopgap mentality in the agricultural lobby could become a potential barrier to further change.

In this paper, I will examine the ways in which Japan’s agricultural policy is moving away from the stopgap approach of the past and discuss the steps necessary to solidify such changes. I will also suggest a number of domestic reforms that are needed in parallel with the TPP negotiations.

One clear sign of change in Japan’s approach to international negotiations is the government’s perception of “sacred” agricultural products that were hitherto regarded as off-limits to concessions. Media reports have given the impression that the government is firmly committed to protecting the five priority items outlined in the Liberal Democratic Party’s manifesto. However, comments by officials involved in shaping farm policy suggest that the government attitude may be slightly more flexible.

For example, Koya Nishikawa, chairman of the LDP’s committee on the TPP, has said, “We’re prepared to consider whether tariffs on (some of) the five items can be abolished.”[1] He has commented, “My personal position (on the tariff lines) is that we should keep them. But the TPP talks are premised on all items being on the negotiating table, and I’m sure the Ministry of Agriculture, Forestry, and Fisheries is aware of that.”[2]

Akira Amari, the minister of economy, trade, and industry in charge of the negotiations, has noted, “There’s no point in negotiating if you’re going to categorically refuse to budge on any point.”[3] Other members of the LDP and government have frequently referred to the need for “careful examination of the contents” of any agreement and a position that is responsive to the “course of negotiations.” Some of the remarks may have been taken out of context, but viewed together they offer a somewhat different picture from media portrayals, both domestic and abroad, of an intransigent Japanese negotiating posture.

There have also been reports that Japan had submitted a draft proposal to lower its tariff rates on some the five “sacred” priorities during the February Singapore meeting.

The government position, therefore, appears quite different from the mindless inflexibility seen during the Uruguay Round, when Japan sought to block rice tariffication at all costs. This may partly be due to the strong political support enjoyed by Shinzo Abe today, compared to the instability of the coalition led by Morihiro Hosokawa during the Uruguay Round. One adept move in recent months has been to assign the task of dealing with agricultural cooperatives and local farming communities to Koya Nishikawa and other politicians with strong ties to the farm lobby. This represents a radical change from the days when such politicians would vociferously oppose any trade concessions.

Also heartening were officials’ comments made to Tokyo Foundation research fellows that any budget allocations for domestic measures taken in the wake of an agreement would focus on items directly linked to agricultural production, rather than on the kind of vaguely defined programs adopted following the Uruguay Round. And rather than narrowly dwell on the total value of such allocations, efforts would be made to adopt measures that actually boost the incomes of farming households.

Who Benefits?

A farmer plants rice using a rice-planting-machine in the city of Katori, Chiba Prefecture. (© katorisi)
A farmer plants rice using a rice-planting-machine in the city of Katori, Chiba Prefecture. (© katorisi)
Looking at recent developments in agricultural policy as a whole, the LDP–New Komeito coalition launched agricultural reforms last year, and implementation will begin in earnest later this year. In concrete terms, the new policies will include the gradual abolition of the so-called gentan policy of rice paddy reduction, whereby the government has paid subsidies to farmers to reduce their acreage under rice cultivation. Another step involves establishing “farmland intermediary management institutions” to encourage the consolidation of farmland. Both of these measures are aimed at making growing rice more cost-effective and represent proactive initiatives ahead of a TPP accord—unlike the foot-dragging on domestic reforms seen during the Uruguay Round.

One cannot overlook the fact, though, that the change in posture may also be a reflection of the dangerous decline in Japan’s agriculture and the urgent need for reform. The average age of Japanese farmers is over 65, and the total area of abandoned farmland has reached 396,000 hectares—equivalent to the whole of Shiga Prefecture. Some statistics show that more than half of rice-farming villages[4] now have no farmers to till the paddies. There is no denying that Japanese agriculture is facing a serious crisis.

What are the key issues that must be addressed, given the situation Japan finds itself in today? Farmers say they have been at the mercy of a fickle agricultural policy and are anxious about future directions. There have been radical shifts in the chief targets of the policy, especially in the light of the change in government in recent years, presenting substantial risks for farm operators.

For many years, a succession of LDP-led governments relied on public works spending to advance agricultural policy and address rural development. This approach enabled them to build up political support in rural communities, and LDP politicians from such constituencies often became the spokespersons for the farm lobby, particularly the agricultural cooperatives. The chief instruments of public policy at the time were public works projects and other supply-side measures, and they were used in advancing agriculture policy as well.

Following the Democratic Party of Japan’s electoral victory in 2009, the new government made substantial cuts in public works spending while introducing an “individual farming household income support” system to provide farmers with direct subsidies, according to the area of cultivated land. This was part of the DPJ’s election pledge, which also included measures to enable farmers—even those with small plots—to continue tilling the land by encouraging their expansion into the food processing and marketing sectors. The party placed “all farmers, including smallholders” at the center of its agricultural policy. Once debate began on Japan’s participation in the TPP negotiations, though, the DPJ government made a 180-degree turn and began emphasizing the need for enhanced competitiveness, the role of ninaite (bearers), and “policy concentration.”

The word ninaite has a very specific meaning in the context of agricultural policy. It does not refer to all farmers but only those currently operating “effective and stable farm management,” as described in the 1999 Basic Law on Food, Agriculture, and Rural Areas, and others who might be expected to achieve such standards in the future. “Efficient and stable farm management” means farming on a level capable of bringing in a lifetime income comparable to that obtainable in other industries by working a similar number of hours.

Since 2007, the LDP has introduced a numbers of measures to support a stable income for managers engaged in the cultivation of rice and other agricultural products. The aim of these measures was to allow such managers to obtain income roughly comparable to what they might expect to earn in other industries and thereby give agriculture a stable and sustainable future. The measures outlined a number of conditions regarding the size of the farming business in an attempt to bolster land-extensive farming. The change of government in 2009, though, prompted a dramatic change in the kind of farmers targeted for development and support.

After returning to power in December 2012, the LDP maintained the “individual farm household income support” system for a year before announcing plans to cut subsidies in half in 2014 and to phase them out by 2018. Inasmuch as subsidies were provided only to those households that adhered to the government’s gentan policy, their abolition would eliminate a major incentive to reduce the acreage under rice cultivation. The administration is also setting up intermediary institutions in each prefecture to encourage the consolidation of farmland into the hands of the ninaite.

The bulk of assistance provided under Japan’s farm policy is expected to continue going to the ninaite. But exactly how the policy will evolve in the years ahead is still far from certain. Many claim they see little clear sense of direction, which is perhaps unavoidable given the inconsistent policies of the past. The decisions regarding who will be the main recipients of farm assistance are also likely to prove quite painful, not only for the farmers themselves but also for the agricultural cooperatives and the politicians who rely on the support of the farming community.

But given the nation’s increasingly precarious fiscal situation, pork barrel largesse is no longer an option. There is a need for thorough debate on such key questions as who should receive the subsidies that are financed by taxpayers and, ultimately, who should bear the burden of ensuring a stable supply of food and protecting the environment. The public must also be better informed of the reasons for the decisions reached. Without fuller accountability, policies capable of reinvigorating Japanese agriculture will remain elusive.

Now or Never

A review of the Basic Plan for Food, Agriculture, and Rural Areas has begun and is expected to be completed by March next year. The plan sets the priorities for government strategy over the next 10 years or so, and here, too, there is likely to be considerable debate on who the principal “bearers” should be. Partly due to external factors like the negotiations for the TPP and other “mega” free trade agreements, Japanese agriculture either needs to remake itself with bold reforms or face being driven over a cliff.

There are definite signs of change in agricultural policy, but this may not be enough. It is the job of politicians to balance competing interests and take responsibility for their decisions. But the crisis facing agriculture will not go away simply by blaming the politicians. The LDP is not the same party it was when it dominated Japanese politics, having experienced an election loss in 2009 and owing to ongoing generational change. Even members of the party’s agricultural zoku (tribe) are showing interest in remaining accountable to all taxpayers—not just in lobbying for the farming sector.

Inasmuch as it is public opinion and the voice of constituents that move politicians to action, though, they will feel compelled to safeguard the five “sacred” areas if that is what is demanded of them, as was the case in the Uruguay Round. Similarly, if attention becomes narrowly focused on the total value of the compensation package for farmers, the discussion on domestic countermeasures will again deteriorate into a squabble for budgetary resources. In this sense, the media and the agricultural cooperatives have a vital role in shaping the politicians’ course of action.

Japan needs to take advantage of the TPP process to clearly identify the bearers of agricultural policy and to seek the desired transformation of the sector. Whether Japan can secure real gains this time around depends on the choices made by all those involved. This may be Japan’s last chance to change its agricultural policy.

 



[1] Comments made to the press during a visit to Indonesia on October 6, 2013.

[2] From a speech made at the Japan Agricultural Journalists’ Association, December 20, 2013.

[3] Press conference, February 18, 2014.

[4] Villages in which 70% or more of cultivated land is devoted to growing rice.

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