Academic journal article Agricultural and Resource Economics Review

Import Demand for Quality in the Japanese Beef Market

Academic journal article Agricultural and Resource Economics Review

Import Demand for Quality in the Japanese Beef Market

Article excerpt

The case of reduction in ad valorem tariffs as a trade liberalization policy is considered in this article. It is shown that the reduction leads to a higher quality of imports, ceteris paribus. This hypothesis was tested on the case of Japanese beef imports from the United States and Australia. U.S. beef, according to the results of Gallup surveys, is considered by Japanese consumers to be a high quality product, while Australian beef is considered to be a low quality product. Empirical results support the hypothesis. Moreover, the recent domination of U.S. beef in the Japanese market is further explained by increasingly more efficient U.S. beef production relative to Australian production and a strong income effect, where an increase in per capita income leads to more demand for higher quality products.

Key Words: ad valorem tariff, beef imports, Japan, quality, trade liberalization

(ProQuest Information and Learning: ... denotes formulae omitted.)

Most literature regarding trade liberalization focuses on its benefits from an increase in international trade volume. We postulate that trade liberalization may have some additional effects that have not been sufficiently emphasized in trade theory or previously empirically addressed. The trade liberalization due to the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO) often follows the pattern of non-tariff trade barriers being converted into tariff equivalents, which are then reduced or eliminated over some period of time negotiated between participating countries. Import tariffs are considered more transparent than non-tariff measures, and because of that they have been a preferred policy instrument in multilateral trade negotiations (Clarke and Evenett 2003).

Miljkovic (2002) determined that different forms of trade liberalization (e.g., reductions in per unit versus reductions in ad valorem import tariffs) affect the quality of imported goods that consumers demand. Thus, consumers may end up consuming more low-quality imported goods due to a reduction in per unit tariffs, or more highquality imported goods due to a reduction in ad valorem tariffs. second, the choice of a trade liberalization instrument may result in different patterns of composition of imports if different countries export differentiated-quality products. Thus, liberalizing trade does not imply an automatic increase in exports by all exporters into the liberalized market. Moreover, market shares in the import markets may shift significantly.

The objective of this study is to look into the Japanese trade liberalization policies and measure the effect they may have had on beef import markets that experienced a major shift from predominantly importing Australian beef in the 1980s, to predominantly importing American beef in the late 1990s. Other factors contributing to this shift are also analyzed. The Gallup Organization conducted several surveys in Japan during the 1990s and early 2000s examining consumers' perceptions about the quality of beef in the Japanese market. It was determined that Australian and U.S. beef are two different qualities of the same good, with U.S. beef being perceived as a higher quality product. Therefore, our article puts a special emphasis on analyzing possible implications of the reduction in import tariffs (due to GATT) on the quality of Japanese beef imports.

Japanese Beef Market Overview

The United States is one of the world's largest producers and exporters of beef. For example, in 1996, U.S. beef exports accounted for approximately 17 percent of world beef exports. Major U.S. customers for beef have been Japan, Mexico, Canada, and South Korea (Agricultural Marketing Service 1998). While the United States is the world's largest importer of beef and live cattle combined, Japan is the world's largest importer of beef only. Japan purchased about 90 percent of its fed beef imports from the United States (the remainder from Canada and Australia) during the 1990s. …

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