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PACIFIC REPORT : Food Fight About to Erupt in Japan : Trade: The U.S. took the lead getting Japan to open citrus and beef markets. Now other nations stand to benefit also.

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TIMES STAFF WRITER

On the last day of the Pacific Rim’s largest food exhibition in this Tokyo suburb, a clearance sale of foreign beef was about to commence.

“Final sale! Final sale!” a Japanese salesman boomed, waving red steaks wrapped in plastic. Seven dollars a pound! Half the price of Japanese beef!

A crowd of Japanese consumers quickly gathered, elbowing each other in a discreet but determined surge to scoop up the deals. “Cheap, isn’t it?” “Ah, looks good!” In 15 minutes, the pile of steaks was gone.

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That Japan Foodex scene underscored the tantalizing potential of the Japanese market when import quotas on foreign beef and citrus are removed April 1 after years of U.S. pressure. Japan’s 124 million people are among the richest, per capita, in the world, yet can produce only 48% of their own food.

But the Foodex scene also amplified the two-edged sword of Japan’s liberalization: The clearance sale beef wasn’t American. It was Australian. South Burnett Meat Works beef, to be precise. Marketed under the “Aussie Beef” campaign (“The big nature taste of Australia”), which the nation Down Under has been promoting in Japan for the past two years.

Indeed, some U.S. farmers argue that the opening of Japan’s beef and citrus markets, and the potential opening of its rice market, could backfire on Americans, at least in the short term. It was the U.S. government that led the way in prying open Japan’s markets and braving the ensuing political firestorm. But it will be a host of new competitors around the world who will share in the benefits.

As a result, Australian cowboys may begin to give Coalinga cattlemen a harder run for the money. South African orange growers could capitalize on the freeze-related woes of their Lindsay counterparts. And New South Wales rice farmers could try to exploit the crop shortage bedeviling Sacramento farmers parched by drought.

“I’d be the first to admit that the pressure brought by the U.S. government was certainly the paramount influence on the liberalization of this market. Quite frankly, Australia does not have the trade clout the U.S. does,” said Ralph Hood, chief executive of the Australian Meat & Livestock Corp. in Tokyo.

“But we’ve been supportive of U.S. efforts,” Hood said. “Now that we’re in a competitive situation, it’s incumbent on both of us to compete in the best way we can.”

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It won’t be the first time that U.S. government actions benefited more than Americans. European and South Korean competitors, for instance, have scrambled to take advantage of the liberalized construction market negotiated by the Americans.

For U.S. producers, a primary concern is that import quotas were removed but steep tariffs on beef and oranges were not. The result, some fear, is that the tariffs will magnify the cheaper prices of other nations. At the same time, the lifting of quotas could erode the commanding U.S. market position, developed in part through intimate relationships with the Japanese who controlled the closed system.

(U.S. trade negotiators said they focused on quotas because they are clearly illegal under the General Agreement on Tariffs and Trade. Tariffs, however, are generally legal.)

Still, most farmers are resigned to the reality and are ready to fight.

“Just because the quotas are eliminated doesn’t mean we’re going to be able to sell more fruit. We’re concerned in the short term that you’re going to have products from South Africa, Australia, maybe even China,” said Joel Nelsen, president of California Citrus Mutual, a trade association. “While we created and developed the market in Japan, they’re going to be able to take advantage of it.”

Julian M. Alston, a professor in agricultural economics at UC Davis, argued that Japan and Australia may well benefit more from the beef reforms than the Americans.

“Under the managed trade agreement, the Japanese were giving the U.S. more than their share of quotas. So the managed shares favored the U.S. The unmanaged shares wouldn’t. We’re saying that this could be ambiguous and go the wrong way,” Alston said.

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Others emphatically disagree. U.S. officials in Tokyo predict that the Americans will be able to hang on to their dominant market shares. And the total market will expand, enriching U.S. and other foreign producers alike, they say.

In fact, the biggest adversaries of U.S. farmers may not be other foreigners; it may be the Japanese. Japanese groups affiliated with the nation’s agricultural cooperatives, for instance, have launched a campaign alleging that imported food is unsafe--that milk is tainted by the Chernobyl nuclear fallout, that lemons are contaminated by an Agent Orange chemical.

Despite the concerns, the Americans are still considered the team to beat as Japan ushers in its new phase of open food markets.

Beef probably will be the fiercest battleground. Japanese beef is the choicest--tender and highly marbled.

Among imports, Australia commands a 55% market share in volume but only a 45% share in value, according to U.S. government figures. That’s because most of Australia’s cattle are fed on grass, producing a lean and lower-priced meat used for hamburgers and other mixed products.

But the United States specializes in the more lucrative market for grain-fed beef, which produces a more marbled meat used for steaks and prime rib.

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The table beef market is considered the best bet for explosive growth, and Hood of the Australian meat group projects an overall doubling of demand in the next decade.

To prepare for the expanding market, the Australians are shifting production to grain-fed beef. They are being aided by Marubeni, Mitsubishi, Nippon Ham and half a dozen other Japanese firms that have purchased feed lots Down Under to grow beef exactly the way consumers back home want it.

But Philip Seng, president of the U.S. Meat Export Federation, isn’t worried. He said the U.S. beef industry outranks Australia in possessing the right “genetics” of succulent grain-fed beef developed over decades. He also said the U.S. industry’s scale allows it to supply custom cuts ordered by the Japanese.

And if the Australians have their “Aussie Beef” campaign, the Americans have “Mrs. America.” That current ad campaign in Japan promotes fresh-faced rural American homemakers preparing good old American beef in the pristine and wholesome farmlands of Nebraska and Iowa.

The Export Federation plans to sponsor 5,000 meat promotions in the next year, including U.S. beef cook-offs, recipe books, cooking schools--even a hookup with Matsushita Electric Industrial Co. to promote Japanese microwave ovens and American beef dishes.

For Japanese consumers, however, the jury appears to still be out. Yukiko Suzuki and Yaeko Shishikura, two Chiba homemakers, were among those who snapped up the two-pound steaks for $15 apiece at Foodex. But they couldn’t distinguish between Australian and U.S. beef, and lumped foreign beef into one category characterized by a stronger smell and rougher feel than Japanese beef.

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“Today was a special sale,” Shishikura said in explaining the purchase. “But as you might expect, Japanese beef is best for Japanese.”

U.S. firms dominate 98% of the regulated Japanese citrus market. U.S. officials in Tokyo project that the market will double in the next three to five years as the Japanese learn new uses, such as juicers for freshly squeezed juice.

In the past two years, two new Australian organizations have opened shop in Tokyo to coordinate the export of oranges to Japan. But Mike McGrath, a trade commissioner for the Australian Embassy in Tokyo, said the Japanese would have to pay a very high price for Australian fruit before suppliers would switch from selling to popular Southeast Asian markets.

In addition, South Africa and Spain could enter the market, although the transit time of 24 days to Japan is twice as long as from California. Taiwan and China are other potential competitors, although they produce a different, tangerine-type orange.

The biggest question hangs over Japan’s controversial rice market. For years, the market has been virtually closed because Japan argues it needs to be self-sufficient in producing this basic food.

Although Japanese agricultural officials and farm groups deny it, others say a consensus is growing in Japan to crack a wedge in the sealed market. Japan’s business sector has long supported liberalization, fearing that U.S. ire over the closed rice market would result in retaliation against Japanese TVs, automobiles, computers and other industrial products.

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Polls last year by the Yomiuri newspaper and the Japan Public Survey Institute showed that more than 60% of Japanese consumers surveyed now favor a partial opening. In the past several months a host of Japanese leaders, including former Prime Minister Noboru Takeshita, have called for “flexibility.” Last week, the Nihon Keizai Shimbun newspaper reported that new government guidelines accept the need for a partial opening.

The United States has proposed that Japan open 3% of its market, growing to 5% over 10 years. In exchange, the United States would go along with tariffs that would make imported rice more expensive.

“The Japanese have made it quite clear that as soon as the U.S. and Europe come to some agreement with GATT, they’ll be there with partial market access,” said a U.S. official in Tokyo.

But Japanese agricultural officials say otherwise.

Mitsuru Okuma, director of international economics with the Ministry of Agriculture, Forestry and Fisheries, said the ministry is ready to “negotiate everything,” but opposes the concept of trading quotas for tariffs.

Should the market open, California rice farmers would be the hands-down favorite. Outside Japan, the state is the top producer of the medium-grain glutinous rice that the Japanese favor.

But Mother Nature may have sabotaged California’s chances for the alluring market, at least in the short term. The drought has cut production in half, creating a crop shortage.

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JAPAN: A KEY MARKET FOR U.S. GROWERS Japan is the largest market for U.S. agricultural exports . . . Recipients of U.S. agricultural exports,1988--89: Percent share of total U.S. ag exports: Japan: 21% European Community:17% USSR: 8% Mexico: 7% Korea: 6% Canada: 6% Netherlands: 5% Taiwan: 4% China: 4% Other: 22%

. . .and the largest share of Japanese agricultural imports is provided by the United States.

American growers provide significant shares of Japanese agricultural imports.

Source: Japan Ministry of Finance

OPENING JAPAN’S FOOD MARKET Beef

Quotas: In 1988, import quotas were increased by 60,000 tons a year from a 1987 level of 214,000 tons. Removal of quotas is scheduled for April 1.

Tariffs: An increase from 25% to 70% in 1991. Then a decrease to 60% in 1992 and 50% in 1993.

Oranges

Quotas: In 1988, import quotas were increased by 22,000 tons each year from a 1987 level of 126,000 tons. Removal of quotas is scheduled for April 1.

Tariffs: Remain at present 40% in winter and 20% in summer.

* RELATED STORY: D3

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