Japan Apple Case

Apple Import Ban in Japan (APPLE)



          CASE NUMBER:         100
          CASE MNEMONIC:      APPLE
          CASE NAME:          Apple Imports in Japan

I.        IDENTIFICATION

1.        The Issue

Japan officially opened its markets to apple imports in
1971. Since then, not one US apple has been imported into
Japan despite 22 years of diligence on the part of US apple
growers. Washington apple growers like to call it the "bug
of the month club."  While growers have jumped each hurdle
of regulation against pest infestation, including "fire
blight" and coddling moths, the Japanese erected new
hurdles.  Finally, in 1993 the growers filed a formal
complaint with the USTR.  The Secretary of Agriculture
and the USTR sent a letter to Japan's Minister of
Agriculture which produced a Japanese reply, promising to
open Japan's markets to U.S. grown apples in 1994.  However,
the USTR also threatened the Japanese with Congressional
retaliation in the form of Section 301 of US trade law.
Therefore, US apples were allowed into Japan in 1995.

2.        Description

This trade dispute went on for 22 years before Japan
officially imported U.S. apples.  The Japanese have not imported
any US apples because of concern over pests, such as the coddling
moth and fire blight, which may be brought in with U.S. apples. 
One of the concerns of the Japanese was the coddling moth.  U.S.
growers say that any such pests are killed during required cold
storage period (apples are kept in a dark room at near freezing
temperatures with almost no oxygen).  After that concern was
satisfied, the Japanese brought up concerns about fire blight, a
bacteria that typically infects pears.  The result:
growers planted 3,200 acres in Washington state which were
at least 500 meters from pear trees and other plants (this is
similar to Canada's pine exports to the EU, see NEMATODE case).

However, just before the APEC summit to be held this fall in
Portland, Oregon a letter from the Japanese Vice Minister for
Agriculture was sent to the USTR, Mickey Kantor and Secretary of
Agriculture Mike Espy. This letter made the latest promise by the
Japanese to open their markets to U.S. apples grown to their
specifications (i.e. the 3,200 acres of isolated apples) in 1994.
Therefore, the earliest U.S. apples reached Japan is early in
1995.

As is further discussed in detail below, the potential gain to
US apple exporters is significant.  The USTR predicts that within
a few years, the export market could reach $75 million.  Japanese
currently pay much higher prices for domestic apples, and
U.S. apples would severely undercut those prices for legitimate
cost of production reasons.  The potential loss to Japanese apple
producers is also significant.  Currently, apples in Japan are
considered gourmet items for their decorative use, prizing
perfectly shaped and colored apples. Japanese farmers contend
that U.S. apples are not up to par with Japanese apples and
therefore should be kept out of the Japanese market. 
The Japanese apple producer has the most to lose in a scenario
where U.S. apples were free to enter the Japanese market.

The case is a confrontation between environmental and
trade barriers.  Are these technical barriers (mainly concerning
pest infestations) legitimate Japanese environmental concerns,
designed to keep U.S. pests from destroying Japanese varieties of
apples?  Or, are the technical barriers to U.S. apples merely
convenient non-tariff barriers designed to protect the domestic
industry?

After Japan opened its apple import market in 1995, U.S apples
entered at much lower prices than their Japanese counterparts. 
However, after initial success U.S. apple sales dropped off. 
Japanese consumers complained that U.S. apples were too sour.  If
U.S. apples were allowed to ripen longer for extra sweetness, then
they would more likely to be damaged during transport.(1)


3.        Related Cases

     NEMATODE case
     BALLAST case
     BANANA case
     CODEX case

     Keyword Clusters         

     (1): Trade Product            =    APPLE
     (2): Bio-geography            =    TEMPerate
     (3): Environmental Problem    =    DEFORestation

The United States has also recently negotiated with China to
open its markets to U.S. apples.  Under a Chinese commitment made
in talks in Portland, Oregon in December of 1993, China's market
would be open to U.S. apples, not requiring fumigation (as do the
Japanese) but requiring a period of cold storage and a yearly
trapping program to monitor for the fruit fly. However, US apples
would still face an 80 percent tariff upon entry into China.

The major issue between Japan and the United States is whether
the Japanese claim that U.S. apples are still carrying pests
which the Japanese do not want to harm their apple orchards, is a
technical claim or a political one.  The United States maintains
that the Japanese change the technical criteria as soon as the
last has been covered by U.S. growers.   The goal is to protect
the inefficient Japanese apple growing industry.

After Japan opened its apple import market in 1995, U.S apples
entered at much lower prices than their Japanese counterparts. 
However, after inital success U.S. apple sales dropped off. 
Japanese consumers complained that U.S. apples were too sour.  If
U.S. apples were allowed to ripen longer for extra sweetness, then
they would more likely to be dangered during transport.(1)

4.        Draft Author: Heather Boyles

B.        LEGAL Clusters

5.        Discourse and Status: AGReement and COMPlete

An agreement was reached shortly before the APEC summit in
1993.  Japan's Vice Minister for Agriculture, Forestry and
Fisheries agreed in a letter to the USTR Mickey Kantor 
allowing US apples grown in 1994 into Japan.  The Japanese
letter was in response to a letter sent by the USTR and Secretary
of Agriculture Mike Espy urging the Japanese to open their
markets as promised 22 years before.

Although an exchange of letters on a bilateral basis has taken
place, the U.S. apple growers have also filed a formal complaint
with the USTR.  There has been no formal decision by any of the
U.S.'s trade-related agencies on this issue.

6.        Forum and Scope: GATT and MULTIlateral

Although no formal law has been invoked, the issue might very
well be taken up under the GATT MFN law which states that trade
concessions to one country shall be offered to all countries.
Earlier in 1993 Japan decided to let in New Zealand
apples which had been under the same restrictions as U.S. apples.

The apple growers' associations have also sought help
under US Trade laws such as Section 301.(2)  The USTR also
indicated that there was sufficient Congressional pressure
to invoke Section 301, to determine whether Japanese
barriers were unfair and to what extent U.S. industry has
suffered material damage.  However, as of yet, this formal
procedure has not taken place.

7.        Decision Breadth: 2 (USA and JAPAN)

8.        Legal Standing: TREATY

If GATT provisions were to be invoked in this case, it would
fall under the legal status of treaty, one signed by both the
United States and Japan among others.  There are no bilateral
treaties specifically for apples, but bilateral agreements, in
the form of official letters, have been attempted. 

C.        GEOGRAPHIC Clusters

9.        Geographic Locations

     a.   Geographic Domain:  North America [NAMER]
     b.   Geographic Site:    Western North America [WNAMER]
     c.   Geographic Impact:  JAPAN

The species being affected by the trade conflict are apples
grown in the Pacific Northwest of the United States, especially
Washington State (which produces 90 percent of all U.S. apple
exports). Trade and environment come into conflict at
the borders of Japan, where the trading of U.S. apples is halted
for environmental concerns, specifically apple pests like the
coddling moth and fire blight.

The geographic impact of the conflict affects both Washington
state, where apples are being grown under specific Japanese
specifications and still are not able to be sold to Japan, and in
Northern Japan where Japanese apple growers continue to grow
apples on 100 acre lots.

10.       Sub-National Factors: NO

11.       Type of Habitat: TEMPerate

D.        TRADE Clusters

12.       Type of Measure: Import Standard [IMSTD]

The type of trade measure in this case is a regulatory
standard, in which the Japanese insist on certain precautions
(planting apple orchards within a 500 yard buffer in which 
other plants and trees cannot grow, a cold storage period, a
yearly trapping for pests, inspection of US orchards by
Japanese regulatory agents, etc.).

13.       Direct v. Indirect Impacts: DIRect

The impact of these trade barriers on the ability of US apple 
growers to export to Japan could be as high as $75 million per
year (according to the USTR).  Likewise, Japanese pay
$3-$4 per apple compared to the US price for apples,
$1 per pound.

14.       Relation of Trade Measure to Environmental Impact

     a.   Directly Related to Product:       YES APPLE 
     b.   Indirectly Related to Product:     NO
     c.   Not Related to Product:            NO
     d.   Related to Process:                YES DEFORestation

Japanese objections were not to US apples per se (at least
officially), but to the pests that may be carried within the
apples into Japan (fire blight, coddling moth, etc.).

15.       Trade Product Identification: APPLE

16.       Economic Data

Washington state (which produces 90 percent of the U.S. apple
market) produces annually 100 million boxes of apples. About 9
percent of that is annually exported to Asia. Japan's prices
are $8-$12 per 42-pound box, making an annual sales around $800
million.  There are 4,000 orchard owners in Washington state. 
However only 3,200 acres have been planted to Japanese
specifications, i.e. in isolation of all other plants.

17.  Impact of Trade Restriction: HIGH

Since 1971, the Japanese have imported a total of 4,500 boxes 
of apples, all from South and North Korea.  In June of 1993, the
Japanese also allowed import of some New Zealand apples, but not
one U.S. apple.  The price effect on Japanese consumers could be
quite large.  A single apple can sell in Japan for up to $5.00. 
Japanese consumption is currently about 52 million boxes of
apples per year.

18.       Industry Sector: FOOD

19.       Exporters and Importers: USA and JAPAN

Taiwan, Hong Kong, and Mexico each imported about 4 million boxes
of Washington apples in 1995.  In January, 1995 Japan imported
400,000 42-pound boxes of Washington apples.  By the end of March,
only 100,000 more boxes had been sold and growers stoppped shipping
any more.

E.        ENVIRONMENT Clusters

20.       Environmental Problem Type: HABITat Loss

The environmental problem in this case has to do with pest-
infestation.  To the extent that U.S. pests carried in U.S.
apples to Japan may wipe out the Japanese variety of apple, Fuji,
it may be a case of species loss.

21.       Name, Type, and Diversity of Species

     Name:          Apple
     Type:          Plant/Dicot
     Diversity:     19,473 higher plants per 10,000 km/sq (USA)

     U.S. species to be allowed into Japan are Red and Golden
Delicious apples.

22.       Resource Impact and Effect: HIGH

23.       Urgency of Problem: MEDium

24.       Substitutes: LIKE products

F.        OTHER Factors

25.       Culture: YES

Some culture plays a part in the different consumption
patterns by Japanese of apples.  The apple is often central
to a special meal and is displayed as such. Apples are not
an every day fruit as is the case in the US.  The
Japanese also prize the appearance of the apple, which is often
wrapped in tissue paper and place in specially formed display
crates in stores.

26.       Trans-Boundary Issues: NO

27.       Rights: NO

28.       Relevant Literature

Egan, Timothy.  "Angered by Japan's Barriers, US Apple Growers 
     Retaliate."  New York Times.  August 17, 1993.
Haberstroh, Joe.  "Biting into a big market: Apple Growers aim 
     for China - A market of 1.2 billion people may soon reopen
to
     Washington growers."  The Seattle Times.  February 6, 1994.
"Japan Pledges Resolution of Apple Import Dispute, USTR says."  
     BNA International Trade Daily.  September 28, 1993.
"Japan says yes to New Zealand, No to US apples."  The Reuter 
     Library Report.  May 28, 1993.
McCarron, John.  "$3 Apples at Core of Trade War of '94."
     Chicago Tribune.  February 13, 1994.
Sands, David R.  "US Tries to Worm Apples into Japan:  23-year 
     Effort May Bear Fruit."  The Washington Times.  January 27,
     1994.
Trumbull, Mark.  "Japan Opens Door Wider for American Apples."  
     The Christian Science Monitor.  October 1, 1993.
"US Announces Breakthrough in Apple Trade with Japan."  Japan 
     Economic Newswire.  September 25, 1993.
"US Submits Data on Apple Disease to Solve Trade Row."  Japan 
     Economic Newswire.  September 1, 1993.
"US Talks With Government Achieve Breakthroughs on Apples  and 
     Wheat."  BNA International Trade Daily.  December 30, 1993.
Wolk, Martin.  "US Apple Growers Hope Meeting Will Open Markets."

     The Reuter Asia-Pacific Business Report.  November 17, 1993.

                           References

1.   "U.S. Apple Sales Plummet in Japan," Frederick Post, January
11, 1996, B5.

2.   Japan Economic Newswire, June 2, 1993.




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January 13, 1996