Politicians can solve almost any problem — usually by creating a bigger problem.
- Thomas Sowell
DISCUSSIONS to create free trade agreements are always a bit like negotiating one’s way through a briar patch, regardless of the parties involved. The case for free trade isn’t easy to make, and appeals to our hard-wired tribalism often find a resonance whose amplitude far exceeds the input. Another complication is the natural tendency of countries to advocate the liberalization of those sectors in which they have an advantage and to get all huffy about industries in which they are at a disadvantage.
Those negotiations become more complicated when agricultural products are tabled for talks. When the crop being discussed is rice in Japan, it is next to impossible to separate the rhetorical grain from the chaff. It isn’t simply that rice paddies account for 56% of all Japanese cropland; there are cultural and spiritual dimensions to rice in this country that are difficult to explain to outsiders, assuming they’re interested in hearing an explanation to begin with. Despite declining consumption and the broadening of the diet, rice is still treated as the main attraction of any meal. Every other food is thought of as a side dish, both at the table and linguistically. And then there’s the dimension unique to Japan. The status of each new Emperor is affirmed in a state ceremony called the Daijosai. In this rite, the Emperor offers newly harvested, sacred rice to the divinities and then partakes of it himself. (Contemporary Japanese themselves recognize that the ceremony exemplifies the universality of the concept of You Are What You Eat.)
In short, to understand the role of rice in Japanese life, it might be useful to imagine how Westerners of an earlier age must have viewed wheat based on the line in the prayer, “Give us this day our daily bread”, and then multiply it by a power of three. Now imagine the response of some people in Japan when they learn that the Trans-Pacific Strategic Economic Partnership Agreement, known as TPP, would eliminate all tariffs among member states in 10 years without exception — including rice.
All of these factors should be taken into consideration by anyone overseas who would report or comment on the debate in Japan over joining the discussions for the TPP, but that won’t happen with the Western media or its on-call stable of bite-sized quote generators in academia. Former Prime Minister Kan Naoto briefly glommed onto the idea in his Sisyphean search for a policy that would endow him with political legitimacy. But Mr. Kan soon fluttered over to some other issue — his priority was to prolong his survival in office, his interest in the matter was tepid and transitory, and even he knew he lacked the skills to either persuade or bulldoze the farming communities, the roughly 50% of his own party opposed to participation, and the agricultural lobby in the bureaucracy. His interest was so superficial, in fact, he carried out a Cabinet reshuffle after bringing up the issue of TPP participation and retained an agriculture minister opposed to the idea.
Now the new government of Noda Yoshihiko is eyeing the potentially poisonous fruit and wondering if it should take a bite. His government and the ruling DPJ will decide early next month whether Japan will take part in the TPP talks. (Mr. Kan was supposed to have decided early this summer, but the prompt execution of affairs is not the hallmark of DPJ governments in general or Mr. Kan’s in particular.) Their decision seems to be timed to coincide with the APEC summit.
Opponents offer the same protectionist arguments to be expected in any country, and chief among them is perhaps Nakano Takeshi, once a bureaucrat in the Agency for Natural Resources and Energy and now a Kyoto University professor. Mr. Nakano published a book this year called TPP Bomeiron, or TPP: On National Ruin. The knee-jerks might assume this is yet another example of Japanese isolationism, but Mr. Nakano himself would beg to differ. Also the author of a book titled Free Trade is a Trap, he claims his arguments are based on the economic nationalism of David Hume in Britain, Alexander Hamilton in the U.S., Friedrich List of Germany (the founder of the German historical school of economics), and even the neoclassicist British economist Alfred Marshall. (The inclusion of the latter is somewhat odd; Marshall has been described as “a firm but cautious adherent of free trade”, though he also advocated protecting new industries.)
Author and university professor Ikeda Nobuo has added TPP Bomeiron to his list of “books that must not be read” (either at the top or bottom, depending on your perspective). He dismisses it as a 200+ page rehash of two false arguments: (1) TPP is a de facto American FTA, and (2) The increase of imports in TPP will result in deflation.
Others who urge caution warn of being bulldozed in the negotiations by the United States. Superficially, it would appear they have a point; Japanese negotiators seem to be congenitally incapable of defending themselves against American pressure in any negotiations. Yet this argument ignores Japan’s partial ban on U.S. beef imports that has remained in effect since 2005 due to mad cow disease. Only meat from those cattle aged 20 months or younger is allowed in the country.
Meanwhile, DPJ member and former Agriculture Minister Yamada Masahiko is mobilizing opposition within the party. He also claims that half of the DPJ MPs are opposed to participation, and insists this is not an issue requiring urgent action. His estimate of half might have been too low. It’s now reported that he’s collected 191 signatures from party members in the Diet backing his opposition.
For an idea of the absurdities to which the obstructionists will resort, here’s a paragraph from commentator Yayama Taro, a TPP proponent:
Japan’s Ag Ministry bureaucrats, agriculture industry groups, and their allies in the Diet haphazardly oppose any attempts at liberalization without thinking of the future benefits. When the government wanted to liberalize banana imports, the apple growers of Aomori were fiercely opposed. They claimed they would no longer be able to sell apples. When the import of bananas finally was liberalized, the farmers made improvements to Aomori apples and were able to supply a greater variety. Today, they are exported to Taiwan and China, and domestic consumption has also risen.
It gets even worse:
An Oct. 12 meeting of DPJ lawmakers opposed to or skeptical about this proposal focused on issues related to the health-care and pharmaceutical industries.
At the meeting, senior executives of the Japan Medical Association warned that the deregulation of these industries resulting from Japan’s participation in the accord would cause the health-care system in Japan to collapse.
Foreign Ministry officials in charge of the TPP pointed out that a public health-care insurance program is not covered by the TPP negotiations, but the participating legislators refused to be reassured.
No one has ever gone broke underestimating the intelligence of the average politician. Then again, an intelligent person is unlikely to go into politics to begin with.
Japan’s Free Marketeers
Despite the broad unsupported assertions, verbal sand-throwing as a diversionary tactic, and superficial commentary, the Japanese public is being offered counter-arguments and is finding those arguments to be worth their consideration.
Asakawa Yoshihiro, the deputy editor of Nogyo Keieisha (Farmers’ Business) published Nihon ha Seikai Goi no Nogyo Taikoku (Japan is the World’s Fifth-Largest Agricultural Superpower) in February 2010. It ranked #2 on the Amazon non-fiction best-seller list for the year. (The copy I bought was printed in March 2011, and it was already in the 14th printing.)
Mr. Asakawa holds that the argument claiming Japanese agriculture is weak lacks a basis in fact. He claims that the Agriculture Ministry deliberately understates the agricultural self-sufficiency rate to maintain a crisis atmosphere among the public as a means to enhance its influence. He insists that the industry has successfully boosted production, that a decline in the farming population will not result in the waning of agriculture, and that Japan has enormous potential for becoming a food exporter.
This previous post summarizes an article in the September 2009 issue of Voice, which features an interview with Itochu Corp. Chairman Niwau Ichiro. Mr. Niwau also thinks Japanese agriculture can be internationally competitive, that it could thrive in markets that were completely open, and that even rice would be price competitive if the tariffs were removed. The key, he says, is to reform misguided government policy and amend current land use laws that encourage acreage reduction to prop up rice prices.
Kon Kichinori, the editor of the aforementioned Nogyo Keieisha summarized the view of the optimists in a recent article in Diamond Online. Here’s most of it in English.
Japanese agriculture is often thought to be suffering from declining numbers of agricultural workers, the aging of the agricultural workforce, small-scale farming, and the lack of competition. The backdrop to these assertions is the historical view of an impoverished peasantry, in which farm households are poor and weak. This view still survives in the contemporary administration of agricultural affairs. But we have already developed a dynamic class of agribusiness entrepreneurs, and it is time for us to abandon the romantic historical view of an impoverished peasantry.
This view is based on the historical awareness of the meager harvests and famines of the Edo period when farm productivity was poor. Another factor is the hardships resulting from the high percentage of production confiscated in annual tributes, in which the public sector took 50% or 60% of the crop. This awareness has changed, however, as more research has been conducted into the original documents of the Edo period. Based on surveys from the 16th century, it has been shown that the public sector share of annual tributes fell to 30% to 40% as new technology for agricultural production was developed, and in some cases below that. In addition, the production of such highly profitable products (other than rice) of tea, mulberries, cotton, vegetables, and tobacco rose in tandem with urbanization.
The concept of postwar agricultural reform has been based on the theme of the liberation of the poor peasantry. Laws related to farmland and agricultural cooperatives designed to protect smallholding farmers are still on the books. The historical view of an impoverished peasantry has been the premise of the characterization of agricultural issues as the declining numbers of agricultural workers, the aging of the agricultural workforce, small-scale farming, and the lack of competition.
According to the 2010 Census of Agriculture and Forestry conducted by the Food and Agriculture Organization, the (Japanese) farming population fell from 3.35 million to 2.61 million, a 22.3% drop, in five years. Meanwhile, the average age of the farmers rose from 63.2 to 65.8
Farm households, however, are defined as those with at least 10 ares under cultivation (one are = 100 square meters), or with at least JPY 150,000 in sales of agricultural products. Thus the term “farm household” is a concept that represents households, rather than an occupation. It does not refer to the people who sell their agricultural products. Even those people who have retired from regular jobs and have begun to cultivate at least 10 ares of land to distribute the crop to their relatives as an old-age pastime are counted as agribusinessmen. (Slightly less than 10% of farming households who sell their products report no sales at all.) The average age of 65.8 does not indicate the advanced age of the farm households with people involved in crop production. Rather, it indicates nothing more than the advanced aging of society itself. Apart from the issue of aging, the decline in the number of farm households — even though it is a desirable change — is viewed as a problem, and utilized to proclaim the waning of agriculture.
Most of the households known as farming households in Japan are those headed by salarymen, in which one of the grandfathers grows rice on several dozen ares of land. They won’t stop growing rice even if they lose a lot of money — it’s become part of their lives as well as a pleasant avocation. But the productivity and technological level of the hobbyist rice farmers is of course declining. There are some exceptional producers among those associated with the agricultural cooperatives, but the rice produced by small scale farmers with such self-satisfaction is mixed in the drying facilities with the crop from the producers associated with the cooperatives. The result is a deterioration and variation in rice quality due to small production units and the inability to properly conduct cultivation. The declining labor productivity of the hobbyist farmer who has lost his sense of professionalism has caused the quality of Japanese rice to worsen.
The agriculture industry insists that Japanese rice will be overwhelmed by the foreign product if the high tariffs are eliminated. It is very possible that foreign rice will become dominant if foreign rice and Japanese rice are of the same quality. But the Japanese consumer will probably select Japanese rice from farm households that grow high quality rice with lower costs, even if it is more expensive.
It is undoubtedly true there are aspects to agriculture that cannot be explained just from the industry perspective, which claims that it has maintained rural settlements and transmitted culture. Those people involved with agriculture who use that as a reason to cling to the historical view of an impoverished peasantry are preventing innovation in Japanese agriculture that exceptional agribusiness entrepreneurs are achieving. If they continue to insist on the fragility of Japanese agriculture, it is because they can harvest the benefits of protection through their defeatism.
We have already developed a dynamic class of agribusinessmen. If we abandon the romantic historical view of an impoverished peasantry, we will begin to see the great potential in Japanese agriculture and agricultural villages.
Former Finance Ministry bureaucrat and current university professor Takahashi Yoichi supports Japanese participation in TPP. Here’s the English version of a brief article that appeared in J-Cast on the Web:
The liberalization of trade has long been a matter for debate. In the end, liberalization is desirable for Japan’s national interest. The logic that trade liberalization is desirable has been demonstrated for the past 200 years in the field of economics. This wisdom is also the shared heritage of the world.
While there are of course negative aspects to trade liberalization, we know the benefits will outweigh these over the long term. Specifically, the trial calculations of the Cabinet Office finds the losses of joining the TPP to be about JPY 8 trillion, but the benefits to be more than JPY 11 trillion. The negative aspects would be borne by the domestic producers in agriculture, while the benefits would be enjoyed by consumers and exporters.
While there is some variation in the calculations depending on the preconditions applied, there is no change in the conclusion that the benefits outweigh the disadvantages. Even the economists, who are always mocked for their divergence of opinions, agree that trade liberalization will result in benefits.
It is the job of politicians to determine how to make adjustments and redistribute the positives of trade liberalization to the negatives. This could create a situation in which no one in Japan suffers. The politicians opposed to TPP have abandoned the original intent of their jobs.
The principles that have survived throughout history demonstrate there are more than a few errors in the many arguments opposed to TPP. There is the argument that TPP will destroy Japanese agriculture. But the claim that opening the market will kill agriculture is incorrect. This is clear from the example of the liberalization of American cherry imports.
When the import of American cherries was allowed, some were opposed and claimed it would destroy the Japanese cherry sector. In fact, however, domestic cherry growers differentiated their product by upgrading the quality. The value of production soared by 1.5 times from 1977 to 2005. During the same period, the producers who avoid liberalization and cling to protection — rice — have become moribund. It is a fact that the producers who improved their strengths while having to compete due to liberalization — cherries — have grown.
There is even the extreme view that TPP will inevitably lead to the end of all tariffs. But there are always exceptions in international negotiations. Even in the original TPP talks with four countries, about 10% of the categories were exempted. Besides, the tariffs would not be eliminated immediately, but in stages. Long-term liberalization of more than 10 years has been sought by Chile for milk products and New Zealand for textiles and footwear.
Some argue that once Japan enters negotiations, it will have to participate. No international agreements and frameworks, however, have content that is determined from the start. That content is always determined through negotiation. There are many instances of countries entering negotiations and then not participating. There are also instances of countries that have compromised in negotiations and then not participated because they could not receive the approval of national legislatures.
At any rate, the arguments opposed to TPP are banalities that have been presented throughout the world over the years. At the same time, they provide people with important information: It enables them to clearly understand just who has the vested interests. No matter how much they say it is good for the people, if we carefully examine their claims, we will understand who has the vested interests, and who does not want to lose those interests. This is valuable information, so we must be always vigilant.
One thing we should keep in mind is that the high yen will minimize the advantages of TPP, making adjustment difficult. The government must work toward a lower yen to maximize the benefits of TPP.
It is no surprise that the free marketeers are the positive optimists who treat their audience as sentient adults, while the political class still talks down to them as children. Here’s an example: Japanese prime ministers distribute what they call an “e-mail blog” in both Japanese and English. Earlier this month, one e-mail sent out under the Noda name promised a new agricultural vision for the country. It starts this way:
Yesterday (the 10th), in order to obtain some insights into the revitalization of agriculture, I observed agricultural areas in Gunma Prefecture where people are engaged in leading-edge efforts such as the production of premium brand rice and the operation of direct-sales storefronts. Under the penetrating clear autumn sky, I was able to feel the fruitful nature of autumn throughout my entire being.
Yes, that clumsy translation was not rendered by a native speaker, but the original Japanese is just as dweeby and unlikely to have been finished by most of the people who received it. At the end of the note, the aide who wrote the post for Mr. Noda asks:
In what ways can the national government assist in order to revitalize agriculture and transform it into a growth industry?
The best way to assist is to get out of the way. Events on the ground are providing support for the people who think Japanese agriculture has the potential to be a growth industry without government help. The Diet relaxed the regulations on farmland rental in December 2009 (a step little noted at the time, which at long last puts one in the plus column for the DPJ). Since then, there have been, or will be by next year, 120 instances of companies from other sectors leasing land to grow crops.
One of them is the railroad company JR Kyushu, one of the six companies spun off from the 1987 privatization of the state-run railroad. They started by growing nira, or Chinese chives, on 0.4 hectares in Oita Prefecture last year and harvested 20 tons for use in their restaurant chain in China or sale on the market. They expanded their area of cultivation to 3.5 hectares this year and project JPY 10 million in revenue. Their initial efforts have been so successful, JR Kyushu’s agricultural subsidiary plans to diversify into citrus fruit, cherry tomatoes, and chickens. Their target is JPY 1 billion in revenue in two or three more years.
Also in Kyushu, the Saibu Gas utility is growing lettuce, the retailer Yazuya is growing strawberries and melons, and Kyudenko, primarily engaged in providing electric power facility engineering services, is growing olives. Other companies are producing tea, onions, shellfish, and organic vegetables.
On one side of the debate is the private sector, convinced that Japan can become an agricultural superpower, and that they can get gloriously rich by feeding the nation and helping to feed the world. The people standing in their way are those who always block progress everywhere. They are the romanticists who cling to a vision that was never real to begin with, and the wolf-criers who thunder about a foreign takeover that never occurs. (If it didn’t happen after the postwar Allied occupation, it ain’t going to happen.) Then there are the Ag Ministry bureaucrats protecting their turf, and the beetle-browed politicians who pander to them all to justify their existence when everyone else knows their most productive contribution would be to disappear.
What is likely to happen? As always, it will be a minor miracle if the sensible people win. If Japan joins the TPP after negotiating a treaty that it believes is fair, and the politicians can be prevented from spending everyone else’s money to
buy off compensate the small farmers (particularly without Diet redistricting that gives those regions more seats than they deserve) it will be a miracle of Lourdesian proportions.
Here’s a different look at the benefits of open markets in the Taiwanese mod/trad group A Moving Sound’s performance of the Market Song. Note the American man playing the moon lute, a Chinese woman playing the cello, and the use of the electric bass to present a fresh take on an old sound.