The Economics Of Farming, Or Of Importing Food

Food and farming in Japan are topics close to the heart of this blog. Kurashi is not a place where you can read a lot of comments about election matters, and there are other bloggers who are far more savvy at commenting on the platforms (called "manifesto" in Japan using the English? Spanish? Russian? Latin-inspired? name) of the Liberal Democratic Party, the Democratic Party of Japan and the rest.

I will try to comment on a couple of things that appeared on Tobias Harris' excellent blog, Observing Japan. He is also interested in the Free Trade Agreement policies of Japan's major parties, such as the possibility of a deal between Japan and the U.S., but I think he gets this all wrong:

"Aso was delivering the same message on a different front in Shimane and Okayama Wednesday, when he attacked the DPJ for its position on a US-Japan FTA. Exhibiting the LDP's full-out reversion to agricultural protectionism — discussed here by Aurelia George Mulgan — Aso stressed, "Agriculture is the foundation of the nation." It is difficult to know whether the LDP's attack on this front is having the desired effect, but I have to figure that the LDP has at least convinced the newly born rural floating voters to think a bit longer about whether to cast their votes for the DPJ."

I had a look at Aurelia George Mulgan's article that Mr Harris links to, as it seems central to his argument.

Aurelia George Mulgan clearly understands Japan and its political difficulties very well. But. She starts by calling agriculture "one of Japan’s chief laggard industries." This is where I don't agree. Compared to which other industries? The car industry is hardly running at top speed either, and just about every other manufacturing sector that used to be the pride of Japan are in trouble. As for banks and financial institutions, they are not going through a stellar phase, either, Mizuho being just the latest to post a (small) loss. Comparing apples to, say, ship building or bank stock just doesn't make much sense to me.

Why is agriculture in Japan in trouble? Imagine any other sector where you have 60% imports (or more). No wonder young farmers are rare, although not quite as extinct as Aurelia George Mulgan seems to indicate by the photo illustrating the blog entry over at East Asia Forum. Yes, there are a lot of oba-chans and oji-sans doing some really wonderful farming, but that is really not a photo that illustrates Japan's farming industry. Hardly a good way to make your point. What do you do with old farmers in Australia, shoot them?

Yet, there is more:

"Greater efficiency at home combined with more imports would lower food prices, thereby raising the real income of consumers. At the same time, agricultural reform has important implications for trade policy, particularly for a WTO agreement as well as for Japan’s Free Trade Agreements (FTAs) with Asia-Pacific partners."

Greater efficiency is not the problem, they can certainly do that if there are less imports, not more. In many sectors, Japanese farmers are doing a truly terrific job. More imports of food to a country that already has one of the lowest food security ratios in the world? That is why I have trouble with some economists getting into the debate about the election on August 30. But, I should also say that I'm impressed by the depth of the argument, helping us to understand why real agricultural reform could be vital for Japan’s economy:

"Professor Masayoshi Honma of Tokyo University, who headed up a task force making recommendations to Prime Minister Aso, argues that agriculture is a core sector in many regional economies. A revitalised agricultural industry could, therefore, breathe new life into many local economies. It could even become a mainstay industry for the country according to Kazumasa Iwata, head of the Cabinet Office’s Economic and Social Research Institute. One way would be to form stronger connections between farming and the industrial and commercial sectors and to make more agricultural land available to highly skilled, full-time professional farmers to expand their output and become more efficient producers by exploiting economies of scale.

This would require, among other things, land use reform as well as reform of the rice acreage reduction scheme (gentan), which is a de facto production cartel that elevates the producer rice price and helps to keep small-scale rice farmers in business."

The economics of farming are not the same as say, making novel robots or nuclear rockets. Feed the people first, then think about making stuff. Trade agreements are allright only if people feel comfortable with the deals - Japanese people in many rural areas are not, and they would rather be farming or making food products than see yet another factory pollute precious land that used to be fertile soil. The WTO and Free Trade Agreements should be negotiated and debated in a more democratic way, not behind closed doors in Green Rooms where trade-offs to "open up markets" are making it impossible for farmers to make a living.

Falling apples (NSFW)

In addition, as this blog tries to argue, peak oil and the current global economic crisis should trigger more efforts, not less, to reform agriculture to become sustainable, including promotion of organic agriculture (where Japan certainly lags behind other major industrial countries, such as Sweden or France) and consumer friendly policies to ensure food security and the basic right of food for all.

Should Japan be forced to import more food, I might have to hone my arguments here at Kurashi, and spend a lot more time explaining what activists such as Yasuaki Yamaura at Consumers Union of Japan or Junichi Kowaka at Japan Offspring Fund think: It is a big mistake for economists to believe that consumers just want food to be as cheap as possible, no matter the origin, no matter how it was produced, no matter how far or near.

Observing Japan: An LDP upset in the making?
Observing Japan: The DPJ will bring the ships home — and open Japan's economy to the US?
East Asia Forum: Japan: Is the DPJ the party of economic reform?