Japan Rice Trade

A. IDENTIFICATION

1. The Issue

This case involves the United States who demanded that Japan
replace all of its import bans and quotas on rice with tariffs, a
policy known as ratification, through the GATT Uruguay Round of
multilateral negotiations. On September 30,1993, the Japanese
government decided to go into the international rice market on a
major scale of the first time in three decades. Because of a cool,
wet summer growing season and an outbreak of blight, Japan faced
its worst rice harvest in the post war period --only 74% of the
amount of the previous period's harvest-- and was forced to
purchase, on an emergency basis, foreign rice in the coming 12
months --two metric ton, to one fifth of yearly consumption-- to
bridge this supply shortfall.

Consequently, Japan became the
largest rice importer in the world. On December 14, 1993 the
Japanese government accepted a limited opening of the rice market
under the GATT plan. Currently, 1994's bumper rice crop has
resulted in much of imported rice piling up, unused at warehouses
throughout the nation [Cordy, Jennifer."Growing Japanese Rice Glut
is Causing a Sticky Situation for Foreign Growers", Asian Wall
Street Journal Weekly (September 5,1994.): A4.] In 1994, Japan
harvested 11.98 million tons of rice in 1994, compared with 7.83
million tons last year.] (This is similar to Japan Apple Imports
case, see APPLE case).

2. Description

This case was actually involved in the bilateral trade negotiations
of the United States and Japan. The logic of US's demand for the
Japanese opening of the rice market was theoretically derived from
US's US$50 billion trade deficits with Japan [Smith, Charles.
"Staple of Dispute: Tokyo Hints at Concessions on Rice Trade," Far
Eastern Economic Review (vol.155. no.40, October 28, 1993.): 33.]
Therefore, this GATT proposal was seen as the one part that forms
a linkage of the US-Japan trade dispute. It was a symbolic issue,
representing "Japan's sagging, heavily regulated" market, along
with sectors such as medical equipment, telecommunications, and
insurance auto parts.[Sapsford, Jathon and Williams, Michael, "Panel
Proposes Basic Shift in Japan Economic Policy," Asian Wall Street
Journal Weekly (December 20,1993.): A7. ] Rice has encouraged the
world to blame Japanese protectionism for the country's vast trade
surplus.["The Voice of Rice: Korean for Protection," The Economist.
(vol.7841, no.329. December 11, 1993.):34.] Accordingly
manufactures have been major beneficiaries of the multilateral
trade regime and will not view a Japanese-instigated collapse of
the Uruguay Round with equanimity ["Away from the Brink: Japan on
Defensive as GATT Talks Look to Restart" Far Eastern Economic
Review. (December 23, 1992.): 53. For another example, Shinroku
Morohashi, chairman of Mitsubishi Corp., expressed his satisfaction
with the rice liberalization, saying "Hosokawa (prime minister) has
shown international common sense." ].On the other hand, Japan
argues that foreign rice must be barred to ensure self-sufficiency
in the country's food staple. From the international trade
perspective, only 3 to 4% of the world rice production --roughly
14metric tons-- goes for export. The US's share of world
production is 2%. [The Economist. "Starters-and-Stripes Sushi: Rice
Production," (November 27, 1993.):30.]

As the background of this dispute, the United States Rice Millers
Association (RMA) asked for a quota of up to 2.5% of the Japanese
market. Although the US Trade Representative (USTR) turned down this
request in October 1986, it agreed to put it on the agenda for the
Uruguay round of multilateral trade negotiations in 1987. Onward,
the US demanded the Japanese open the rice market via the 108
nation GATT. In 1993, the Clinton administration trade policymakers
indicated that the White House would act on petition under Sanction
301 if Japan decided to maintain its ban on rice. The Japanese
counterpart, the powerful Central Union of Agricultural
Cooperatives opposed strongly. Furthermore, opposition against
lifting the import ban came not only from farmers but also from
consumers. In the late 1993, Japanese were boiled over this
historical rice dispute.

For the Japanese, this case was focused from its self-sufficiency
point of view, as well as from the cultural implications of rice.
In 1989, Japan was the world's largest net agricultural products
importer and its self-sufficiency ratio has been slumped to 46% in
1991 (in comparison to France 143%, US 113%, W Germany 94%). The
Japanese consume 26% of the total calories from rice, the largest
source of caloric intake. However, it has dramatically decreased by
half, from that of in 1960 (50%). [Soda, Osamu. Fact about Japan:
Japanese Agriculture, (International Society for Educational
Information. Tokyo, 1993.):6.] Calorie self-sufficiency has
constantly declined after the World War II: in 1965, 73%, in 1985,
52%, and in 1991, 46%. Among the major products, such as wheat
(12%), soybean (4%), beef (52%), sugar (36%), only rice is the
self-sufficient (100%) product.[Soda, Osamu. Fact about Japan:
Japanese Agriculture, (International Society for Educational
Information. Tokyo, 1993.):4.] As of 1990, total Japanese
agricultural production had a value of 11.42 trillion yen broken
down as follows: rice 28%, livestock 27%, vegetables 23%, fruit 9%,
and others 13%[Soda, Osamu. Fact about Japan: Japanese Agriculture,
(International Society for Educational Information. Tokyo,
1993.):5. ].

Since the Japanese domestic rice price is as seven times as high as
the international rice price, ratification of rice might force the
Japanese to go out of farming. Accordingly the Japanese might not
achieve rice self-sufficiency in the 21st century. This raise
questions on the Japanese national security. Rice is also the
center of Japanese traditional village-based culture; for example,
in Japanese the word rice (gohan) means meal. For instance, in
Japanese "did you eat a meal?" is literally, "did you eat rice?"
Currently, the Japanese government predicts nation will not begin
substantial rice imports until late 1995, because there are ample
leftover supplies from the bumper 1994 domestic crop.["Japanese Say
Substantial Imports of Rice Unlikely Until Late 1995," Journal of
Commerce. (April 11 1995.):A5.]

3. Related Cases

Korean Case Korea also negotiated with GATT multilateral trade
negotiation for its opening of rice market. Korea accepted the same
agreement as Japan accepted, with 10 years moratorium period. Prime
Minister Kim Young Sam apologized to farmers for ending government
protection of the market and eliminating subsidies.[Shanda Islam.
"A Deal, of Sorts: GATT Comes up with an 11th-Hour Global Trade
Accord." Far Eastern Economic Review. (vol.156. no.50. December
23, 1993.):54.] However this decision impact on Korea much worse
than on Japan. In Korea the portion of rice producer to the total
GNP is 3.1%, whereas Japanese counterpart is only 0.6% in
1991[Hasegawa, Hiroshi. "Read the Six Years; After the Opening Rice
Market (Kome Koaiho Rokunengo O Yomu)." in Asahi Shinbun Weekly
AREA ( December 20, 1993. Tokyo.):16-17]. Korean farmers' one forth
of income is derived from rice; on the contrary in Japan, it
consist of only one eighth of income. According to an estimate of
Korean Foreign Economic Institute, as a result of this concession,
Korea could correct its trade surplus to US by 1400 million dollar
a year. On the other hand, Korean farmers would lose 50 million
dollar a year[Ibid. p.16.].

(1) Keyword Clusters
(1): Trade Product = Rice
(2): Bio-geography = Temp
(3): Environmental Problem = Habitat Loss

4. Draft Author: Junko Saito

B. LEGAL Clusters

5. Discourse and Status: Agreement and Complete

Agreement was reached on December 15,1993. According to the
agreement, ratification of rice imports will come into effect after
a six-year period during which a fixed, but limited quantity of
rice (between 4%, 4m ton to 8%, 8m ton of total consumption [Smith,
Charles. "Rice Resolve: Tokyo Makes Last-Minute Concession on
Imports," Far Eastern Economic Review (vol.156. no.50, December
23, 1993.): 14. ]) will be imported. This implementation might
affect on the Food Control Law, which provides the government with
strong power over the rice market and allows it to restrict
imports. It was originally legislated during the World War II, to
centralized the authority of providing food on the government. The
law either might have to be revised or given a new interpretation
to allow market forces to operate.

6. Forum and Scope: Japan and Multilateral

7. Decision Breadth: MULTI (USA, Thailand, Myanmar, etc.)
Japanese participation in the world rice trade has significant
effects on world rice trade. Iwakura [The director general for
agricultural policy at the Liberal Democratic Party in Japan]
argues that the world market can not accommodate another major
importer. "If Japan were buy 1 million tones of rice in the next 12
months that would be certain to push prices sharply."[ ]Actually
international prices have been rising almost daily since it became
apparent that Japan would be a major player in the thin world
market for rice.[Smith, Charles. "Steamed Up : Japan's Rice-Import
Ban Stays, Despite Shortfall", Far Eastern Economic Review,
(vol.156. no.41, October 14, 1993.):73.]

On the other hand, suddenly the export of rice polishing equipment
is growing. Asian countries have begun to improve the quality of
their rice, in preparation for the expansion of the global rice
trade predicted in the wake of the Uruguay Round Agricultural
Agreement. Since Japanese equipment is said to be the best in the
world, in 1995 manufactures of rice polishing equipment expect an
increase of 30% of to 50% in the value of exports over 1994.[Japan
Agrinfo Newsletter, (vol.12, no.6, International Agricultural
Council, Tokyo, February 1995): 5]

8. Legal Standing: TREATY
The GATT provision was invoked in this case. The Japanese
government shifted a ban on rice import in December 1993.

C. GEOGRAPHIC Clusters

9. Geographic Locations
a. Geographic Domain : ASIA
b. Geographic Site : EAST ASIA
c. Geographic Impact : JAPAN

10. Sub-National Factors: NO

11. Type of Habitat: Temperate [TEMP]

D. TRADE Clusters

12. Type of Measure: QUOTA [QUOTA] Japan will import 4 % (4 metric
ton) to 8% (8 metric ton) of rice from 1994 to 2000. This quota is
called as "minimum access clause" and this is the previous
moratorium stage toward tariffication.

13. Direct vs. Indirect Impacts: Indirect

14. Relation of Measure to Environmental Impact
a. Directly Related : YES
b. Indirectly Related : No
c. Not Related : No
d. Process Related : YES (Rice Paddy Loss)

15. Trade Product Identification: Agricultural Production, Rice

16. Economic Data
Total farmers/Total Japanese population : 10.9% (1991)
Number of farming house holds: 3.8 million 3.1% (1991)
Agricultural products/total GNP: 2.4% (1991)
Rice production/total GNP: 0.6% (1991)
Rice income/total agricultural income per house hold: 4.0% (1991)
Full time farmer/ Part time farmer : 12.1% (1991)
Rice paddy/ Japanese total land: 13.7% (1992)

17. Impact of Measure on Trade Competitiveness: BAN

18. Industry Sector: FOOD

19. Exporter and Importer US and Japan

The agricultural Ministry planed to import 200.000 metric tons of
foreign rice by the end of 1993, mainly from Thailand. Japan
imported 500.000 to 600.000 metric tons of rice from Thailand in
1994. The rest purchased from the US and China.[Owens, Cynthia.
"Thai Could Get Gob Boost if Japan Opens Rice Market." Asian Wall
Street Journal Weekly. (December 13, 1993.): A20.] Only 3-4% of
world rice production -roughly 14m tones- goes for export.
American's share of export world production is barely 2%, yet, it
ships out about 18% of all the rice in international trade, a
proportion second only to Thailand's.[The Economist. "Starters-and
-Stripes Sushi: Rice Production," (November 27, 1993.):30 ] The
international rice market itself is thin, no homogeneous, and
highly influenced by trade restrictions. The "thin market" problem
of rice trade is compounded by the fact that many consumers prefer
specific types and qualities of rice.[Gail L. Cramer, Eric J.
Waules, and Shangna Shui. "Impact of Liberalizing Trade in the
World Rice Market." American Journal of Agricultural Economy.(
vol.75. Feburuay,1993):219 ]

E. ENVIRONMENT Clusters

20. Environmental Problem Type: Source Problem [DEFOR] (potential
rice paddy loss)

Rice paddies contributes to maintain Japanese environmental
condition through the securing of greenbelt zones and the water
purification and groundwater enrichment.

21. Name, Type, and Diversity of Species

Name: Rice
Type: Japonica rice
Diversity: NA

Two major rice types are indica and japonica. Strong consumer
preferences for particular rice types are based primarily on
cooking and taste characteristics. Japonica rice is relatively
sticky when it cooked and has shorter, thicker grain. It also
called "short rice."

22. Impact and Effect: LOW and Scale
23. Urgency and Lifetime: MEDIUM / several years
24. Substitutes: CONSV

VI. OTHER Factors

25. Culture: Yes

For the Japanese the symbolic importance of rice is deeply rooted
in the Japanese cosmology: rice as soul, rice as pure money, and
ultimately, rice as self. During Edo era (1603-1867), rice was
circulated as intermediate, money. Sushi is one of the
traditional cooking methods. Originally, it was one way to
preserve fish, putting rice and fish alternately in a wooden pail,
for fermenting. Nowadays this kind of sushi is called
"oshi-shushi."

Even though the Japanese had the custom of eating rice since
ancient times, only after the nineteenth century, did rice became
the national food staple. Therefore rice has been valued as a
special food, associated with rituals. Rice harvest rituals, both
among the folk and at the imperial court, have been a major
cultural institution.

The Japanese emperor originally was the
shaman who celebrated rice harvest in ancient times. Harvest ritual
celebrate cosmic rejuvenation through an exchange of their souls,
that is, selves, as objectified in rice. People believed that rice
had mysterious super-natural power. One example can be seen in an
ancient custom; people shook rice in bamboo and let the dying
person hears the sound at his deathbed. On mountainsides, people
called rice "the Buddhist saint (Bosastu)." The word "offering (to
the God)," osonae, itself used to refer to the rice cake prepared
for ritual services. It means that the rice had been used as main
servings for the formal rituals to God.

Rice is not a mere grain,
rather a personified thing that has soul. People perceived rice
cropping to be closely connected to the super-natural, religious
behavior, rather than an economic activity.

Rice farmers had a
notion of "ina-dama," the soul of rice, and personified a rice.
Therefore even today, people believe that the soul of rice, which
is called the God of rice paddy, dwell in the last rice stubble.
The person who reaped the last rice would bring it back home and
hold service. This custom is still practiced at the rice harvest
rituals.

Rice paddies have been a common theme portrayed in woodblocks
prints, printings, and contemporary posters in travel agents'
offices to attract urbanites to "the countryside." They have been
intimately portrayed in the representation of agriculture, the
countryside, the seasons, and the past. As a metaphor for self,
rice paddies are our ancestral land, our village, our region, and
ultimately, our land, Japan. Therefore, the Japanese has strong
cultural attachments to rice.
26. Trans-Border: No
27. Rights: NO
28. Relevant Literature

Ohunuki-Tierey, Emiko. Rice as Self. (Princeton University Press.
1993.)

Avery, P. William. World Agriculture and the GATT. (Lynne Reinner
Publishers. 1993.)

Inoue, Hisashi. Inoue Hisashi no Kome Koza[Mr. Inoue's Lecture on
Rice.] (Tokyo, Iwanami Shoten. 1989.)

-------------- Zoku-Inoue Hisashi no Kome Koza [Mr. Inoue's Lecture
on Rice: Part II.] (Tokyo, Iwanami Shoten. 1991.)


References

Asahi Nenkan 1994 [Asahi Yearbook 1994] (Asahi Shinbun sha, 1993,
Tokyo.):164-167.

The Economist. "Starters-and -stripes Sushi: Rice Production,"
(November 27, 1993.):30.

---------------. "The Voice of Rice: Korean for Protection,"
(vol.7841, no.329. December 11,1993.): 33-34.

---------------. "Ricable: World Trade," (vol.7831. no.329. October
2, 1993): 75-76.

Freidland, Jonathan and Smith, Charls. "Staple of Dispute: Tokyo
Hits at Concessions on Rice Trade," Far Eastern Economic Review.
(vol. 156. no.43, October 28, 1993.): 22.

Gail L. Cramer, Eric J. Waules, and Shangna Shui. "Impact of
Liberalizing Trade in the World Rice Market." American Journal of
Agricultural Economy. (vol.75. February, 1993): 219-226.

Fukui, Yuki. "Japan agriculture on the Rips," Tokyo Business Today.
(vol.62, no.12. December
1994):28-29.

Hasegawa, Hiroshi. "Read the Six Years; After the Opening Rice
Market (Kome Koaiho
Rokunengo O Yomu)." in Asahi Shinbun Weekly AREA ( December 20,
1993. Tokyo.):16-17.

-------------------. "Jiristu seyo Kome Noumin[Rice Farmers, Be
Independent]," in Asahi Shinbun
Weekly AERA, (November 22, 1993. Tokyo.):26-28.

Machight, Susan. "Short Rice Crop Process Challenges, Opportunities
for Tokyo," Japan
Economic Institute Report.(no. 37b, October 8,1993.):8-10.

MacKnight, Sesame. "Short Rice Crop Posed Challenges, Opportunities
for Tokyo" Japan
Economic Institute, (no.37b. October 8,1993): 8-10

------------------. Japan Agrinfo Newsletter, (vol.11, no.12,
International Agricultural Council,
Tokyo, August 1994): 5-6.

Islam, Shanda. "A Deal, of Sorts: Gatt Comes up with an 11th-Hour
Global Trade Accord. "Far
Eastern Economic Review. (vol.156. no.50. December 23, 1993.):54.

Japan Agrinfo Newsletter, (vol.12, no.6, International Agricultural
Council, Tokyo,
February1995): 5.

Smith, Charles. "Rice Resolve: Tokyo Makes Last-Minute Concession
on Imports," Far Eastern
Economic Review ( vol.156. no.50, December 23, 1993.): 14.

-------------. "Steamed Up : Japan's Rice-Import Ban Stays, Despite
Shortfall", Far Eastern
Economic Review, (vol.156. no.41, October 14, 1993.):73.

-------------. "Staple of Dispute: Tokyo Hints at Concessions on
Rice Trade," Far Eastern
Economic Review ( vol.155. no.40, October 28, 1993.): 33.

Soda, Osamu. Fact about Japan: Japanese Agriculture, (International
Society for educational
Information. Tokyo, 1993.):1-8.

Yamagata, Yuichiro. "Probing the Impact of the Uruguay Round" Tokyo
Business Today.
(April 1993.):34-36.

Wander, Berber. "Rice Decision Strains Coalition Unity, Jeopardized
Political reform" Japan
Economic Institute Report.(no. 46b, December 17, 1993.):5-7.