The horizon is not so far as we can see, but as far as we can imagine

Japan refuses to eliminate agricultural tariffs, and spikes the TPP (Take 2)

The Trans Pacific Partnership trade agreement in in trouble, and one of the reasons is Japan has refused to eliminate agricultural tariffs.  Japan is entirely correct in this.

Japan’s agriculture is not efficient: it costs more to grow food in Japan than it does in many other nations.  If Japan removed its tariffs, its agricultural sector would either be eliminated or forced to consolidate and specialize in crops it has a comparative advantage in.  Whatever these are (perhaps silk), they wouldn’t be staple food crops.  Japan would thus lose what ability it has to feed itself and would have to buy even more food on world markets than it does today.

Regular readers will recognize this pattern from the article on why the third world is even more impoverished today than it was 40 years ago. Now Japan is by no means a third world country, and money would be loaned to it to buy said food, but Japan is not a healthy economy either.  The Japanese recently lowered the value of the Yen significantly, and  their exports didn’t increase.

Contrary to economic dogma that sort of thing happens fairly often: people simply are already buying as much of what Japan makes as they want.

Japan is not what it was 30 years ago, or even 10.  It runs an export deficit and it is barely running a current account surplus any more . Even when the economy was healthy, having to buy much of its energy was painful, having to buy its food would be even more so.

But more importantly, it would make Japan vulnerable to anyone who controlled foreign currency loans they need to buy the food, and to the major food producers.  Japan can print money, to be sure, and has, but there comes a point where you can’t, where people won’t take it.  Japan isn’t there yet, but they risk being there someday soon.  And bear in mind that as global warming bites, food will become more and more scarce. Right now we have a huge food surplus, that will not remain the case.

Countries which cannot produce what the rest of the world needs, nor produce what they need, are always in great danger from other nations which can cut them off.  They give up power over their own fate, and others will take advantage of it to force them to do as they wish, including opening up their markets to allow the commanding heights of the economy to be purchased.

Japan has been badly run for decades, and made the same mistake the US did when its bubble collapsed: they did not wipe the debts off the books, but instead extended and pretended.  That lead to the long “bright depression”, but it is now leading them into a much worse period.

They are, however, doing something right in refusing to remove their tariffs.  To be sure, they are doing so for domestic political reasons (the small rural farmers are politically powerful), but that doesn’t mean it isn’t still the correct thing to do.

Since the TPP is, overall, a terrible trade agreement (they virtually all are) let us hope the Japanese stick to their guns and that it does scupper the agreement.  It’ll be best for them, and for us.

(An earlier article on the same topic disappeared except for the title.  This is a rewrite, but with additional detail.)

(Article changed to indicate that Japan is still (barely) running a current account surplus, not a deficit.) -10/14/2014)

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  1. Half Of the money is for playing games with the upper half percent or so. there is no way for it to work out with this has the basis.

  2. also reading Ezra Pound, a flamboyant supporter of Hitler and Mussolini. he does have some good points however, which is why we still read him. but he is an irredentist, nonetheless. give them a go if you have the time.

  3. Pelham

    I believe Japan typically runs a current account surplus, not a deficit. But their trade balance is indeed in the red, distressingly so these days after a long slide in the yen. So your points stand.

    At this stage we’ve had about 30 years of gung-ho globalization, most of a working lifetime. If it had lived up to the billing its many proponents gave it, we’d all be deliriously happy now, wouldn’t we?

  4. Lisa Formally OldSkeptic

    Oh, the US has worked very hard to get Japan to ‘be more assertive’, translated become more militaristic and go for China.

    This is an ‘unintended consequence’…oops.

    The TPP and TAPP were designed (they excluded Russia and China) to ensure the dominance of the US$ and US corporations ‘forever’. And to end any alternative economic, social models…like the TPP means Medicare in Australia is gone. The TAPP ends social healthcare (like the NHS) in Europe. It is a true ‘one world model’ of total bastrardry, cruelty and 1% rule.

    Australia, even under a Labor Govt signed up straight away of course.

  5. Ian Welsh

    My bad, earlier this year they were in current account deficit. They’re now out. However the trend on the current account deficit is downward and they will definitely be completely in it in a couple years if the trend doesn’t change. Thanks for the correction Pelham

  6. Hairhead

    We have an analogous situation in Greater Vancouver, BC.

    The city and its suburbs are built on the Fraser River Delta, some of the most fertile land in all of Canada. Much of the produce the city lived on for the first 100 years of its existence came from the truck farms of the delta.

    And now, with no limits at all on foreign ownership, and developers completely owning city councils and planning departments (this is one of the most corrupt areas of North America), not only are excellent houses being destroyed and trucked to landfills for speculative, poorly-built McMansions, prime agricultural land is being destr0yed also. And I do mean destroyed; throughout the region, soft, wet, fertile delta land which is not structurally appropriate for high-rise and condo developments is made permanently useless for cultivation by “stacking” 30 feet of concrete blocks and clay earth on top of it for 2 years before building.

    And all this while produce prices in the area have risen 30% due to the California perma-drought.

    The financial elite and the politicians of Vancouver seem determined to accelerate the pace and do 40 years worth of damage in the next 10.

    But that’s unregulated, “innovative” capitalism for you.

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