Media Global Economy 2020.05.08
On April 11, NHK reported that the Ministry of Agriculture, Forestry and Fisheries (MAFF) will pour 50 billion yen into promoting sales of wagyu, subsidize the use of wagyu in school lunches, and pay 20,000 yen per head of shipped cattle to farmers as the spread of the novel coronavirus infection has caused a decrease in wagyu demand and a 60% increase in domestic beef stock.
As concrete measures for promoting sales of wagyu, an incentive of 1,000 yen per kilogram is to be given in the case where a wholesaler sells wagyu to retailers, etc., and additional costs for wagyu stock storage are also to be subsidized. The government would like these measures to help recover consumption through sales at supermarkets.
I have pointed out the problems with measures for wagyu under consideration in the LDP and the Diet twice, in " The reason why the stupid plan of "wagyu gift certificates" was proposed"and "Don't dispose of surplus agricultural products in school lunches! What is reflected by "Use luxury wagyu (Japanese beef) in school lunches". I have also pointed out that the income level of livestock farmers is extremely high and that there is no reason for the protection or support of livestock farmers from any perspective of food security, environmental protection and public health maintenance in " Unknown aspects of Japan's farming communities (I): the average annual income for pig farmers is 20 million yen ($182 thousand)! " and " Farm households no longer vulnerable.
Incoherent content of the measures
Here I will first examine the content of the measures that have been reported, leaving aside the validity or legitimacy of such measures. To get straight to the point, even if the purpose of wagyu demand recovery or stock elimination was right, the content of the measures is incoherent.
If I were in charge of the measures at MAFF and a subordinate brought me such a plan, I would have sent it back.
First, the level of incentive of 1,000 yen per kilogram is exessive. The price of a wagyu carcass (A4 grade wagyu ox) has decreased by 600 yen from about 2,300 yen in this January to about 1,700 yen currently. The grant of 1,000 yen exceeds this price decrement substantially and is equal to more than half of the current price of a carcass.
Isn't this grant excessive?
How would MAFF explain to the public that 1,000 yen per kilogram is reasonable? This incentive is a more lavish and bigger treat than other countermeasures against the novel coronavirus.
Second, there is the definitively bad timing of providing wagyu in school lunches.
Schools are currently closed, so school lunches are not provided. Therefore, even if a subsidy for the purchase of wagyu beef is given, wagyu beef will not be consumed as school lunches are not provided. This measure is not useful for eliminating wagyu beef stock.
Once the novel coronavirus infection is stamped out, school lunches will resume. However, the demand for wagyu at restaurants and hotels will also recover, so it will be unnecessary to provide wagyu beef in school lunches. It is like opening a beach in winter when no one would visit it.
Last, it is utterly incomprehensible that the government attempts to increase the market supply of wagyu, paying a shipping incentive to farmers, while trying to eliminate stock. If supply increases though demand decreases, stock will further increase. It is like heating a room at full blast in summer when it is already hot.
If the government tries to decrease stock, it must delay shipping from farmers. For this, farmers must supply extra feed to cattle, so the government should give a subsidy or loan for the extra cost.
It is not only wagyu beef that has built-up stock
Also, in terms of the validity of the measures, why is it necessary to eliminate stock of wagyu beef? Why will the government provide a sales promotion incentive only for wagyu beef or subsidize cost increases caused by increases in stock?
It is not only the industry providing wagyu beef that has built-up stock since tourism and the food service industry slumped owing to the spread of the novel coronavirus infection. Other industries providing materials for tourism, etc. will also be damaged. Shouldn't the government think of reducing the burden on the National Federation of Agricultural Cooperative Associations, who have wagyu in stock, rather than wagyu farmers?
How would other food service businesses feel if the government tried to give relief only to sukiyaki restaurants even though this suspension or self-restraint of business has widely damaged the food service industry and restaurant business? Wouldn't most businesses feel that there was an inadequacy if relief was provided only to wagyu?
In addition, Article 3 of GATT provides for the "rule of non-discrimination" that bans favorable treatment of domestic products over foreign products. This is a basic principle of GATT/WTO.
Subsidization only for wagyu beef in sales from wholesalers to retailers or in school lunches clearly violates WTO regulations. Subsidization has to cover imported beef as well.
Even within MAFF, a policy violating the rule of non-discrimination never used to be considered. Even if the current MAFF, which cannot go against the wishes of Japan Agricultural Cooperatives or farm-interest lawmakers, is left out of the equation, wouldn't the Ministry of Foreign Affairs or the Ministry of Economy, Trade and Industry point out any problems with the implementation of this as government policy?
The WTO's dispute resolution procedures do not function owing to the US' pushing through rejecting the appointment of Appellate Body members. However, does this mean Japan may assume an unconcerned attitude because the WTO cannot sue Japan? Doesn't Japan feel guilty or ashamed that Japan, having advocated multilateralism, will take such action as ignoring rules and principles in trade?
If Japan assumes such an attitude, a lot of countries, including China, would adopt policies violating the WTO one after another. This means that Japan would contribute to the collapse of multilateralism in trade.
The livestock industry should not be protected
For the multifunctionality (economic externalities ) of paddies, such as water resource recharging and flood prevention, subsidizing rice farming is economically meaningful (though Japan's agricultural policy has been implementing a totally opposite policy of subsidization for acreage reduction (gentan) to decrease paddies having such effects).
However, protecting or supporting wagyu farmers is economically void of all meaning. Economically, wagyu production should rather be taxed and reduced.
First, from a perspective of food security, there are few reasons for protecting the livestock industry.
Except for a small number of dairy and beef cattle that are raised on pasture, the overwhelming portion of Japan's livestock is fed on corn, soybeans, and hay from the US and other countries. The Japanese livestock industry would be dealt a devastating blow if the sea lanes were interrupted and the import of feed was stopped as a result. The industry would be of no use in a food crisis. Among wagyu cattle, perhaps only short-horned cattle in Iwate Prefecture, having a low rating in terms of meat quality, are pastured.
The livestock industry does not benefit the environment as it discharges considerable amounts of excreta as a by-product. In the US, livestock excreta is utilized for corn cultivation, so resources circulate and environmental problems do not worsen. However, the Japanese livestock industry, depending on imported feed, just keeps accumulating harmful nitrogen content in soil.
The same process has caused the blue baby phenomenon in Europe. For the environment, it is better to import beef from overseas. When I heard a well-known agricultural economist saying so 20 years ago, I was surprised and worried whether it would be all right to say such a thing in the agricultural industry. This is a taboo and an inconvenient truth to the agricultural industry. The livestock industry does not have multifunctionality like paddies.
Moreover, cattle generate methane, a greenhouse gas more powerful than carbon dioxide, through belching. The world has been showing moves towards reducing the livestock industry. The moves include the development of technologies to produce plant-based meat and cultured meat. Even the dairy farmer with the longest history in California, where the demand for dairy products, including milk, are decreasing, has shifted to almond cultivation.
Wagyu beef bad for health
In addition, wagyu beef is also bad for public health.
Omega-3 fatty acids, found in fatty fish and nuts, has the function of turning the blood to a smooth state. In contrast, the excessive intake of omega-6 fatty acid, found in beef, pork, butter, soybean oil, corn oil, etc., accelerates arteriosclerosis and causes myocardial infarction and cerebral infarction. If the ratio of omega-3 and omega-6 fatty acids exceeds 1:2, a problem arises. In Japanese people, having adopted a Western-style diet that consumes a lot of livestock products, this ratio ranges from 1:6 to 1:10.
In wild animals and cattle fed and fattened on grass, this ratio is 1:2. However, the ratio in cattle fed on grains such as corn rises to 1:8 to 1:10. Consumption of domestic beef fed on imported grains will cause arteriosclerosis that leads to myocardial infarction and cerebral infarction.
Why are wasteful measures taken only for wagyu farmers?
Even if measures for wagyu farmers are necessary, more than enough measures for price falls of calves and carcasses have already been prepared, such as the program for subsidizing beef calf producers and the marukin measure for beef fattening farmers (See " Japan's farm protection policy untouchable even for PM Abe's office").
Yet why are wasteful measures being taken for wagyu? Moreover, wagyu is just selling slowly; it is not completely unsellable.
Different from wagyu farmers, business operators forced to suspend business and workers discharged from service owing to the spread of the novel coronavirus infection have completely lost their job. Some of these people feel uneasy about becoming unable to pay rent and forced to leave their home by the owner. However, the government has denied compensation for absence from work, and benefits for the needy are insufficient.
Yet why can only wagyu farmers receive such red-carpet support?
If income decreases, wagyu farmers can also receive benefits such as 300,000 yen in the same way as others. The wagyu measures reported are added to those benefits.
Moreover, until quite recently, before the stock of wagyu increased and the price of wagyu dropped, wagyu farmers reaped great profit under historically high prices. If this is taken into consideration, this price fall does not have such a big impact. It is ridiculous to think that wagyu farmers would have financial difficulties like restaurant operators who have suspended business or workers who have been discharged from service. If only wagyu farmers are given preferential treatment nevertheless, this would be the actual discrimination.
So, what is the reason for only wagyu producers being given special treatment?
It is that influential persons among the present farm-interest lawmakers are from the livestock farming areas of south Kyushu (Kagoshima and Miyazaki).
Hiroshi Moriyama, elected in Kagoshima Prefecture and Chairman of the Diet Affairs Committee, LDP is first on the list. He was Minister of Agriculture, Forestry and Fisheries. He concurrently serves as the president of the Japan Livestock Industry Association, as the successor of the late Mr. Sadanori Yamanaka, being influential for many years as a powerful leader of the livestock industry. In addition, Mr. Tetsuro Nomura, a member of the House of Councillors elected in Kagoshima Prefecture and from the Japan Agricultural Cooperatives, serves as Director of Agriculture and Forestry Division, LDP as a leader of farm-interest lawmakers. Mr. Yasuhiro Ozato, a member of the House of Representatives, similarly elected in Kagoshima Prefecture, has also held successively the positions of Director of Agriculture and Forestry Division, LDP; Chairperson of Agriculture, Forestry and Fisheries Committee, House of Representatives; and Senior Vice-Minister of Agriculture, Forestry and Fisheries. Mr. Taku Eto, Minister of Agriculture, Forestry and Fisheries, being from Miyazaki, has held successively the positions of Director of Agriculture and Forestry Division, LDP, and Senior Vice-Minister of Agriculture, Forestry and Fisheries.
When there are so many influential lawmakers, even if they said nothing, MAFF officials would read between the lines. In particular, Prime Minister Abe and Agriculture, Forestry and Fisheries Minister Eto are on good terms, so all farm-related policies could be left to the Minister of Agriculture, Forestry and Fisheries by the Prime Minister's office (Kantei). The financial authorities and departments in charge of diplomacy or trade cannot say no to proposals made by the Minister, standing in high favor of Kantei. Is this not the background to the reported wagyu measures?