But Japanese shoppers also pay a hefty price to feed their taste for pork. According to Iowa State farm economist Dr. Dermot Hayes, Japanese supermarket prices for pork average about 2.5 times higher than prices for equivalent pork cuts in U.S. grocery stores. At this rate, a Japanese shopper buying thin-sliced pork loin to make rolled pork and vegetables would pay almost $14 per pound for pork that sells for $5.59 per pound in suburban Washington, D.C.
Why are Japanese pork chops so expensive? In significant part – because of trade barriers.
Because Japan imports almost half of the pork its citizens consume, trade restrictions play an especially significant role in the price of pork in Japan.
Japan’s “Gate Price” import system essentially requires that all pork imports—from high-end tenderloin to offal—meet a government-set reference price, and then imposes a 4.3 percent duty on top of that price. According to Iowa State’s Dr. Hayes, this system is equivalent to at least a 30 percent import duty on imported pork.
After adding standard wholesale and retail markups, this means that Japanese consumers pay prices for imported pork that are on average some 60 percent higher than without trade restrictions. And the Gate Price further inflates consumer prices on processed items like sausage by forcing Japanese pork processors to use expensive cuts, like pork loins.
Filling the rest of the market basket in Japan isn’t cheap either, as Japan has some of the world’s highest food prices. The average Japanese household spends 13.7 percent of its income on food, compared to 9.3 percent in the United Kingdom, and 6.3 percent in the United States. As with pork, Japan’s trade barriers contribute substantially to high consumer prices for other foods. Significant trade restrictions—including high duties (38.5 percent on beef and 40 percent on processed cheese), government-purchasing requirements for wheat and rice, highly restrictive quotas, and a variety of other border measures—substantially increase the prices that Japanese shoppers pay for their favorite foods.
In the Trans Pacific Partnership (TPP) trade negotiations, Japan is resisting calls by the United States and other TPP partners to phase out its extensive network of barriers to farm imports. It claims that—for Japan—foods like pork, beef, rice, and wheat are “sacred,” and is reportedly demanding hundreds of exemptions from the usual requirement that ambitious trade deals phase out virtually duties and other major trade restrictions.
Eliminating trade restrictions like Japan’s Gate Price system for pork would certainly be hard to swallow for Japan’s politically powerful but declining farm sector, which receives over half of its income from the Japanese government and benefits significantly from complex trade barriers that keep domestic prices high.
But farm reform is not exclusively a concession on Japan’s part. Indeed, Japan, as a whole, would be the biggest beneficiary of a transition to a more open and rational system of farm trade.
And Japan’s consumers would benefit significantly. It’s estimated, for example, that reducing the share that Japanese households spend on food from 13.7 percent to just 11 percent would save Japan’s shoppers an estimated $72 billion annually – or almost $1,400 per household.
And that would put a lot of ginger pork on Japanese tables.
Ed Gerwin, Jr. is Senior Contributing Editor at Republic 3.0 and President of Trade Guru LLC.