how japan’s potato chip crisis and the tpp are linked

[chahlley]

(commentary Today Thursday 27 April 2017)

How Japan’s potato chip crisis and the TPP are linked

Potato fields in Japan’s northern island of Hokkaido, waterlogged by last summer’s crop-decimating typhoon,

have created a potato-chip shortage across the country. Hokkaido also has a series of potent

non-tariff barriers relating to potatoes. PHOTO: AFP

BY

LEO LEWIS

PUBLISHED: 4:00 AM, APRIL 27, 2017

At the height of the scare earlier this month, Japan’s biggest television channels all ran alarming features on the unfolding potechi shokku — the revelation that production of some of the nation’s favourite chips (potechi) would cease in the face of a potato shortage (shokku).

The on-screen procession of footage was almost identical: First the brands as the country knew and loved them (pizza, French salad and soy-mayonnaise flavours), then the panic-emptied supermarket shelves, then the disappointed public bemoaning a summer picnic season bereft of chips.

And finally, the supposed origin of the problem: Potato fields in the northern island of Hokkaido, waterlogged by last summer’s crop-decimating typhoon. The chip shortage cuts deep. The explanation — more political than agrarian — has deliberately been left shallow.

It is instinctively odd that Japan’s chips, along with the mighty food and drink market of the world’s third-biggest economy, should be this sensitive to a one-off domestic weather incident when the problem was known nine months ago and the required commodity in question is well traded on global markets.

The suddenly exposed vulnerability offers rare clues about how Japan may approach those markets in the future and why the government of Prime Minister Shinzo Abe appears so very keen to resurrect the collapsed Trans-Pacific Partnership (TPP) trade framework, even though the Trump administration has ruled the United States out of it.

So why did Calbee, Koike-ya and other Japanese chipmakers not simply lay-in more foreign potatoes after the poor 2016 harvest?

There is no global potato shortage, and Japan certainly imports a lot of soft commodities.

For the past two decades, Japan’s food industry has worked with a domestic agricultural self-sufficiency rate (when calculated in terms of calories) of about 40 per cent.

When it comes to potatoes, about 30 per cent of those consumed in Japan (in various forms) come from abroad (mostly the US). The 4.3 per cent tariff on imported fresh US potatoes — of the sort that could be used to make the now suspended chip brands — does not seem prohibitive.

The answer lies in the historic power of Japan’s agricultural lobby to arrange key strongholds of protectionism, and the particular success of Hokkaido in raising a series of potent non-tariff barriers.

For decades, Japan cited fear of disease as a reason to block fresh (as opposed to dried potato for use in fast-food chips) imports. Even since that position was relaxed 11 years ago, Japan still only allows potatoes from selected US states, for certain months of the year and on condition they are processed at factories based near Japanese ports.

Equally effective, however, has been the farming lobby’s installation of a protective consumer credo: That Japan’s domestic produce is of measurably higher quality than anything from outside and that the best chips, for example, must be made with Hokkaido potatoes.

So when asked about the potechi shokku, Calbee and others shrug and explain that imported potatoes would not meet quality standards.

While the restrictions on fresh potato imports are at the extreme end, the TPP negotiations, which concluded in a deal that was signed (but not ratified) by the 12 participating nations last February, highlighted the general ferocity with which Japan has protected its farmers.

The US alone pointed to onerous Japanese tariffs on everything from ketchup to shelled pecans, with some as high as 1,000 per cent.

The often understated feature of Japan’s decision to sign up to the TPP was its preparedness to sweep so much of this away: To look at an old, tightly woven national tapestry of lobbying, cronyism, patronage and political contortion and decide it was no longer in the country’s interest. In the case of fresh potatoes, even the non-tariff restrictions relating to disease prevention were due to be loosened.

Mr Abe and his administration expended significant political capital taking on the farmers and taking TPP over the line. TPP created, in effect, a massive shortcut to reform Japanese agriculture and commodity markets that might otherwise have taken the political lifetimes of many leaders.

It is perhaps not surprising, therefore, that Japan is now leading the effort to resurrect the TPP, press ahead without the US and not allow the momentum to be lost. For Japan’s peckish picnickers, the great 2017 crisp shortage is an annoyance. For Mr Abe, it is the spectre of legacy slipping away. FINANCIAL TIMES

ABOUT THE AUTHOR:

Leo Lewis is Tokyo Correspondent for the Financial Times