Abstract
In recent years, Japan has been concerned about the impact of trade liberalization on domestic production of beef. The objective of this study is to econometrically analyze the current demand structure for beef in Japan and clarify the respective degrees of product differentiation between imported beef and domestically produced beefs (Japanese beef, hybridize type beef, and dairy beef) by considering the non-stationarity of time series data; subsequently the impact of trade liberalization on domestic production of beef is also considered by studying the case of the Trans-Pacific Partnership (TPP) Agreement. The main analysis results are as follows. First, Japanese beef and hybridize type beef are differentiated from imported beef; however dairy beef competes with imported beef. Second, the TPP Agreement will not significantly affect the quantities demanded for Japanese beef and hybridize type beef but will decrease the quantity demanded for dairy beef by 8.6%. Third, the current situation is different than the one after the beef tariffication in 1991; thus, we cannot expect a mitigation effect of trade liberalization impact, such as compensating for the decrease in production of dairy beef by the increase in production of Japanese beef.
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Notes
- 1.
The period of analysis is set in consideration of the fact that monthly data on the dressed carcass production quantity for hybridize type beef can be obtained from January 2006, that the Great East Japan Earthquake occurred in March 2011, and moreover, that the price of imported chicken has not been published since April 2011.
- 2.
The export quantities of beef and pork do not include edible offal and boiled meat.
- 3.
The specific procedure for processing the prices of imported meats is as follows.
First, with regards to imported beef, for the produce of Australia, the simple average price of a total of 31 cuts is calculated, including 11 frozen cuts, 8 chilled grain short-fed cuts, and 12 chilled grass-fed cuts. Next, for the produce of the United States, the simple average price of 6 chilled cuts is calculated. However, the prices of U.S. produced beef by cut were not published from January 2006 to March 2007 because of the decrease in the domestic distribution quantity of U.S. produced beef due to the impact of an outbreak of bovine spongiform encephalopathy (BSE) in the United States. Therefore, from January 2006 to March 2007, the simple average price of 31 Australian produced cuts is used, and from April 2007 to February 2011, the weighted average price of Australian and U.S. produced cuts calculated with the import quantities of these two countries in the relevant month as the weights is used.
Second, with regards to imported pork, first the simple average prices are calculated of 7 U.S. produced cuts, 9 Canadian produced cuts, 4 Danish produced cuts, and 2 Mexican produced cuts. With the import quantities of U.S., Canadian, Danish, and Mexican produce in the relevant month as the weights, the weighted average price of the produce from the four above-mentioned countries is calculated.
Third, for imported chicken, the weighted average price of Brazil-produced leg meat and U.S. produced leg meat with bones is calculated, with the import quantities from these two countries in the relevant month as the weights.
- 4.
Matsuda (2010, 2014) are referred to when performing the analysis in this study. We also followed Matsuda (2014) when deciding the lag length in the unit root test and the co-integration test, as follows. In the ADF test, WS test and co-integration test, if j means the lag length that minimizes AIC (Akaike’s information criterion), the lag length is set as Min (j \(+\) 2, 12). In addition, in the PP test, if T means a sample size, the lag length is set as 4; that is, the integer value closest to T\(^{\, (1/3)}\). Also, asymptotic critical value is used for the unit root test and the co-integration test.
- 5.
DeJong et al. (1992) conducted a Monte Carlo experiment for the unit root test, and Haug (1996) conducted the same experiment for the co-integration test. They clarified that when the sample size is 100 or less, the results of both tests will not be sufficiently reliable. However, in this study, the sample size cannot be increased from 62 due to the data constraints. Therefore, it should be kept in mind that the results in this section are the results with a reservation on this point.
- 6.
When conducting simultaneous estimation with the restrictions imposed, except for the imported chicken expenditure share equation, the simultaneous estimation is carried out using the iterative seemingly unrelated regression method (Kmenta and Gilbert 1968) for the expenditure share equations of the other meats. In this case, the adding-up restriction is automatically established. Also, the time series of the error term in the imported chicken expenditure share equation is estimated ex post facto using the restrictions and data, etc.
- 7.
In the estimation of Eq. 9.3, with \(\rho \mathrm {,\, }e_{it}\) as the parameter and the stochastic variable, assuming that there is the relationship of \({\Delta u}_{it}\, =\, \rho {\Delta u}_{it-1}+e_{it}\) in the error term, Yen and Chern (1992) method is used. With regard to the imported chicken parameters, after carrying out the simultaneous estimation of the expenditure share equations for all the meats except for imported chicken, it is estimated ex post facto using the restrictions, etc. Also, the delta method is used to calculate its standard error. Greene (2012) and others were referred to for the delta method.
- 8.
- 9.
Please refer to the Cabinet Secretariat (2016) for details on the contents of the TPP Agreement.
- 10.
For the pork tariff, in the TPP Agreement, after maintaining the gate-price system and its gate-price of 524 yen/kg, the specific tariff in the low-price band will be reduced from a maximum of 482 yen/kg to a maximum of 50 yen/kg, and the ad valorem tariff in the high-price band of 4.3% will be eliminated. On this point, the Ministry of Agriculture, Forestry and Fisheries (2015) assumed that for pork imports in the future, combination imports will be likely to continue, but the possibility that some low-price cuts would be imported irrespective of the combination cannot be denied. Therefore, although it is difficult to accurately forecast the movement in the imported pork price after the TPP Agreement came into effect, in this study, it is assumed that the combination imports at gate-price will be continued, or in other words, the ad valorem tariff of 4.3% will be eliminated and the imported pork price will be reduced by 4.1%.
Also, for the chicken tariff, in the TPP Agreement, all the tariff, the whole chicken (not cut in pieces) tariff of 11.9%, the meat with bone (legs with bone in) tariff of 8.5%, and the other (boneless meat, etc.) tariffs of 11.9%, will be eliminated. The chicken import in 2014, the percentage of import quantity from countries joining the TPP Agreement out of the total import quantity was 5.4% (mainly meat with bone from the United States), and most of the imports are boneless meat from Brazil. Based on this point, the Ministry of Agriculture, Forestry and Fisheries (2015) expected that the impact of the TPP Agreement would be limited for chicken, but on the other hand, in the long-term, they are concerned that the price of domestically produced chicken will be reduced due to the changes of the import partner countries resulting from the tariff reduction or elimination, etc. Therefore, although it is difficult to accurately forecast the movement in the price of imported chicken after the TPP Agreement came into effect, in this study, the possibility that the import partner countries will be changed by the TPP Agreement is taken into consideration, and it is assumed that the tariff for boneless meat, which is currently the main imported item, of 11.9% will be eliminated and the imported chicken price will be reduced by 10.6%.
In addition, for beef imports, the percentage of import quantity from countries joining the TPP Agreement out of the total import quantity was 99.9% (2014), and for pork imports, the percentage of import quantity from countries joining the TPP Agreement out of the total import quantity was 62.0% (2014).
- 11.
In the analysis method used in this study, because \(\frac{\mathrm {\Delta }p_{k}}{\bar{p}_{k}}\) in Eq. 9.8 is equal to \(\frac{2\left( r_{1k}-r_{2k} \right) }{2+r_{1k}+r_{2k}}\) and is a constant regardless of the price level, there is no need to set a benchmark for price.
- 12.
In Mori and Lin (1990) (analysis period: Q2 1978 to Q1 1988), the meat and fish expenditure elasticity of demand for Japanese beef was estimated to be 2.55, which indicated that Japanese beef was estimated as a luxury good. Also, in Matsuda (2014) (analysis period: January 1994 to March 2011), the meat expenditure elasticity of demand for domestically produced beef was estimated to be 0.812. Conversely in this study (analysis period: January 2006 to February 2011), the meat expenditure elasticities of demand are estimated to be 0.408 for Japanese beef, 0.280 for hybridize type beef, and 0.406 for dairy beef. These differences imply that from the tariffication of beef imports to the present time, the meat expenditure elasticity of demand for Japanese beef has become smaller.
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Takahashi, K., Maeda, K. (2018). Econometric Analysis on Product Differentiation and Trade Liberalization of Beef in Japan. In: Hosoe, M., Kim, I., Yabuta, M., Lee, W. (eds) Applied Analysis of Growth, Trade, and Public Policy. Springer, Singapore. https://doi.org/10.1007/978-981-13-1876-4_9
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