When President Donald Trump pulled the United States out of the Trans Pacific Partnership (TPP) in 2017, the remaining 11 countries agreed to press on without the largest economy in the group and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) was created.
The CPTPP went into effect on December 30, 2018 with six initial signatories: Japan, Mexico, Singapore, New Zealand, Canada, and Australia. Today, Viet Nam joined the group. Five remaining countries – Brunei, Chile, Malaysia, Peru, and Singapore – have yet to sign the agreement.
The U.S rice industry, which never felt the original TPP adequately addressed its concerns, is now facing two new realities as a part of the CPTPP that are less than optimal.
First, the CPTPP gives Australia a new 6,000 metric ton rice quota into Japan – the number three market for U.S.-grown rice. The rice will be imported using the simultaneous-buy-sell (SBS) mechanism that is currently utilized to import table rice for commercial channels. After three years, the quota increases annually, reaching 8,400 metric tons by 2030.
The first SBS tender for Australian rice will be held by the end of February 2019 with another one scheduled for May 2019. Each tender thereafter will be held every two months, for 1,000 MT each. With this schedule, the Australian rice will arrive in Japan in July/August 2019 prior to the harvest of the Japanese crop.
Australia typically grows medium grain but has recently developed new short grain varieties that are viewed favorably in Japan.
Australian rice is the primary competitor for U.S. rice under the existing SBS system and this additional access will intensify that competition.
Australia’s rice production for 2018/2019 is forecast at 450,000 MT and they are expected to export 200,000 MT, similar to last year’s exports. In general, however, water scarcity and competition from other crops have caused a decline in Australia’s rice production and harvested area.
And now, with Viet Nam and Mexico both having enacted the CPTPP, the 20 percent tariff Mexico has on rice from Viet Nam will be phased out over the next ten years. This is the number one market for U.S.-grown rice and despite a clear preference for U.S. rice in the market as a result of higher quality and better logistics, it will represent a threat amongst more price-sensitive customers as the tariff disappears.
“We have made clear to the Administration that a trade agreement with Japan to ensure that U.S. rice doesn’t lose market share to Australian rice is a top priority,” said USA Rice COO Bob Cummings. “We also continue to protect our interests in Mexico through aggressive promotion programs, trade servicing activities, and customer and consumer outreach.”.