Big opportunity for food exporters lies in Japan

Japan’s prime minister, Shinzo Abe.

Our most important market in Asia is currently creating headlines for all the wrong reasons.

This is not good news for businesses trading with Japan, the biggest buyer of Irish-produced services in Asia and second only to China as a buyer of Irish-made goods.

Japan also tops the rankings in foreign direct invest from Asia into Ireland, recently strengthening its position with the €54bn acquisition by Takeda of the Irish-based Shire pharmaceutical group.

Ignoring the poor handling by Japanese prosecutors of the Nissan/Renault chief, Carlos Ghosn’s case and the announcement that Japan will recommence fishing for whales in their waters, much to the astonishment of global conservationists, Japan’s economy shrank more than expected in the third quarter, hit by typhoons and an earthquake that halted factories and stifled consumption.

The contraction in the world’s third-largest economy adds to growing signs of weakness globally, with China and Europe losing momentum.

It’s not surprising that Japan’s prime minister, Shinzo Abe, Bank of Japan governor, Haruhiko Kuroda, and top cabinet officials held a press conference to try and put the best spin on the faltering economy.

Mr Abe said he expects Japan to withstand the turmoil in international trade, which has affected the nation’s foreign trade and GDP growth in the third and — quite likely — fourth quarters of the outgoing year.

Officials expressed confidence that Japan will be able to boost GDP growth next year, not least due to the positive signals for a new trade deal with the US.

However, there is a lot more certainty that some of the bounce will come from the free trade agreement Japan signed with the EU in December, which is scheduled to become effective as soon as February 1.

According to a White House statement, the Japan trade talks will commence on January 21, which will seek to reduce America’s €60bn trade deficit. The US officials are seeking to ensure free access for American goods and services to Japan’s domestic market.

Irish officials will also be anxious to see how the Japan negotiations go, as we ran an €18bn surplus with the US in 2017 and are on track to reach a €22bn surplus of goods trade in 2018.

Whereas the EU/Japan free trade deal will assist Irish exporters in all sectors, there is no doubting that the food and drink exporters should be the biggest winners.

The done deal with the EU will result in the elimination of import tariffs on around 99% of Japanese goods, while Japan will abolish the duties on around 94% of EU imports, receiving access to cheaper EU goods, such as cheese, wine, and pork.

Irish firms, who already export over €2.9bn in goods and €5.7bn in services to Japan every year, have welcomed the deal.

High tariffs on foods and non–tariff barriers on pharmaceuticals have made exporting conditions to Japan tough. It has been difficult trying to enter the market and costly to then maintain a presence there.

The new trade agreement, removing both tariff and regulatory barriers, will be particularly useful for many of our smaller business, who have found the existing rules and regulations too cumbersome, with many abandoning attempts to enter the market.

They can now expect to more easily grow their sales and profitability in the market.

Bord Bia chief executive, Tara McCarthy, led trade missions to Japan in 2018, in anticipation of the freer rules for the food industry.

Japanese consumers, through extensive promotions in 100 retail outlets across Japan, were able to taste quality Irish food.

Bord Bia has partnered with Aeon, Asia’s largest seafood retailer, to promote a range of Irish seafood and to raise awareness about the quality and sustainability credentials of Irish seafood. Ireland currently exports €56m worth of food and drink to Japan.

This is expected to grow substantially, as the EU deal with Japan includes the scrapping of duties on many European cheeses, such as Gouda and Cheddar (current duties are 29.8%).

In addition, it will allow the EU to increase its beef exports to Japan substantially, while on pork there will be duty-free trade in processed meat and almost duty-free trade for fresh meat.

Some 43,500 tonnes of Irish beef are currently sent to Japan at a tariff of 38.5%, which will be reduced to 9% over 15 years.

Japan could be the destination for more than rugby fans in 2019.

John Whelan is managing partner of The Linkage-Partnership, an international trade consultancy with offices in Ireland, Holland, and Switzerland.

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