US - Japan Apple Case.

28 maja 2009 | Magdalena Zatorska

World Trade Orgnisation (WTO) as a legal institution and an international body has to deal with many different cases and problems among the countries. All the problems connected with trade and its aspects have to be resolved in order to make trade between countries more effective. One of the most common cases are connected with the agriculture disputes. While 73 disputes settlements were brought to the WTO within 3 years, 17 of them were connected with agricultural problems. The Agricultural agreement was established and taken more seriously under consideration in 1986-94 in Uruguay Round. The agreement was established in order to achieve a better competition between the counties and avoid typical problems that occur by introducing specific commitments and establish a better market access for all the members. Despite the fact that WTO is able do deal with the problems much easier, there are still some of them that are significant for the agricultural trade. On of those cases is 'an apple case' which involves two the biggest world economies like USA and Japan. While considering the rising problems among those countries it is hard not to think about the reasons of this conflict. How the two biggest economies in the world cannot come to an agreement without help of a third part? In this essay I am going to present in details the situation that occurred and the reasons of the conflict. What is more, I am going to provide additional information about the case in order to show the different opinions and points of view.

While the request for consultation by the US was received on 1 March 2002 the conflict between US and Japan was already in progress. USA as a big and well developed country was looking for a new markets to export its apples world wide. Taking into account the Japanese dependence from USA after WWII the US wanted to enter the Japanese market unfortunately unsuccessfully. Since 1971 the US has been trying to enter the Japanese market with their agricultural products. Unfortunately, when in 1971 Japan finally opened its market for the US apples the situation was not so easy for the US apple growers and finally no apples were exported to Japan for 22 years. Although in 1982 the US tried to establish a positive relationship with Japan and asked about a market access for the US apples, Japan rejected the request using a concern about codling moth that can be transported to the country with the apples as an excuse. What is more, as the time passed other reasons were introduced by Japan like fire blight, the disease that attacks the fruit trees. In 1993 after years of disagreements the US apple growers made a formal complain to the U.S. Trade Representative. The USTR sent the letter to the Japanese Ministry of Agriculture with the information that those actions violate the Section 301 which deal with unfair and unreasonable actions with trade. The Japan had to do allow the US apples in Japan, what happened in 1995.

Unfortunately, for the US it was not the end of the problems. Despite the fact that Japan allowed the US apples into their market the restrictions and phytosanitary measures were very rigorous. Japan was concerned about codling moth and fire blight that can be transported with apples to Japan. The concern about codling moth ended after explanation that before the transportation the apples are storaged in a specific conditions, a dark room with almost no oxygen and a very low temperature, in order to ensure that there are no insects like codling moths. Although the US transport their apples all over the world and has to reach a special trade requirements, the Japanese came up with another concern about the fire blight - the disease that attack the fruit trees. According to this, Japan required a specific growing condition in order to secure the apples from the disease. US growers had to plant the apple trees at least 500 meters from pear trees and other plants in order to create a kind of security zone. All this growth specifications were needed in order to enter a Japanese market.

Because of the Japanese market potential, US apple exporters can gain a lot of benefits from the export. The USTR predicted that the US could gain over 75 million of dollars with a trade with Japan. The Japanese apple market is not so diversified. The prices of apples reach even 5 dollars each because of the Japanese specific demand for 'delicious' red apples. The US by entering the Japanese market would reach a huge niche.

When finally after opening of the Japanese market for the US apples in 1995, the US could celebrate its short-term success. The US apples with much lower price were a very interesting counterpart. But the success did not last long because of different customers preferences, the Japanese complained about the taste of US apples claiming that they are too sour.



As it can be seen from the short overview of the case the problem is getting more complicated along with years. The basic fact is a dispute of two countries - the US and Japan. The US previously was not allowed to import apples to Japan and later on had to face a specific requirements about storage and presence of pests. On the other hand, there was Japan which did not want to let the US' apples into the Japanese market. It was explained that the problem was not with apples itself but with the diseases and insects that could have been transported together with the apples and could eventually jeopardize the Japanese environment and plants.

During the US accommodation of the Japanese requirements, which were strongly connected with storage and sanitization of apples, the US wanted to fulfil all the requirements in order to gain an additional market for apples. When the concerns about coddling moths were explained: the US' apples were kept in dark storage for some period of time in a low temperature, without oxygen in order to get rid of coddling moths, Japan agreed on it so this part of a dispute was solved. However, the Japanese were really concerned about the pests, they required a 500 meters buffer zone between the apple and other fruit trees like peaches. The US agreed on that but only a few of its farmers were able to fulfil the requirements. Unfortunately, the US complained that along with fulfilling already harsh specifications Japan required additional inspections of the orchards by Japanese agents . The US applied all the requirements but they were very expensive and time consuming. What is more, finally the US growers realized that it was no longer worthwhile. Because of the Japanese harsh specifications the export of apples is obstructed and the US can suffer from material damages because of money loss. Moreover, the US research was made about the fire blight. Fire blight is a disease, more precisely is a bacterium, which attacks fruit trees and cause the blackening of the leaves. The US research proved that the phytosanitary requirements were fulfilled and that there were no cases for years about spreading the bacteria by shipping the apples. The US made a research and proved that the disease cannot be spread among trees even when placed from each other fwithin a small distance.

'We harvested 30,000 apples at various distances from trees known to have fire blight and even some from the trees that had fire blight. We assayed 900 immediately after harvest and checked the rest after they had been stored until December, essentially the way exported apples would be treated. No fire blight bacteria were found in any of the apples, and no fire blight developed during storage, confirming the earlier work from the late 1980s.'

But even after this research Japanese did not lower their restrictions. Despite the fact that earlier Kenjinor Nakano, a spokesman for the Japanese Embassy in Washington ensuredthat it is not about the US apples but about the fire blight. He claimed: 'What Japan needs is for the United States to prove that its apples are safe (…) This is not a political issue. It is purely a technical one.' But the proof was not enough for the Japanese. This could be a reason for the US to accuse the Japan of protectionism.

What is more, Japan imported apples from different countries like North and South Korea and New Zealand. The US could feel discriminated because of the fact that Japan is importing apples from New Zealand under the same requirements and not allowing the US apples to come in. Similar situation was with Australia. Australian apples were allowed to enter the Japanese market with lower restrictions because of the claim that there is not fire blight in Australia and there were no case of this disease. What is more, the US did not consider the fact that other countries also has to face harsh Japanese specifications in order to enter the apple market in Japan and paying even a higher price for the entrance. The US, with fulfilling all the requirements and claiming that those all procedures are expensive, was still able to bring in the US apples at a lower price than Japanese Fuji apples which price was up to 5 dollars each. When it comes to the case of New Zealand, with fulfilling all the requirements the price of an apple was even twice as high as domestic ones because of high cost of quarantine. In this case the US can complain about Japanese protectionism and assume that Japanese high restrictions and banished apples is made just to protect their domestic market. On the other hand, it is hard to understand why the US is complaining about the barriers that are made by Japan when the US already knew that the apples were unsuccessful because of the different tastes in Japan. The Japanese market is a specific one. Japanese consumption of apples is not so popular in Japan. The Japanese society is a very perfectionist one what has to be taken under consideration when entering this market. Japanese Fuji apples are almost perfect with its red colour and a delicious taste. All of the apples are placed separately in the tissue paper on the shops' shelves and are given usually as a gift or eaten as a dessert after a dinner. In this case when the Japanese are concerned about quality not about quantity, the US should reconsider the different strategy to enter the Japanese market. What is more, Japan as a 'perfect society' do not even consider their restrictions as harsh and high. The US can argue that Japan is 'violating the international trade rules by blocking American apples without any scientific or health basis' but on the other hand has to be aware that for the Japanese those specifications are very high. The government official in Aomori Prefecture which produces half of Japan's apples said: perfection 'We are extremely disappointed,(…) We don't think the current inspection system is too harsh.' In the country like Japan the US has to be prepared for the highest quality expectations - without any reason the most expensive beef comes from Japan. The Japanese are extremely concerned about the quality, everything needs to be perfect, there is no place for mass production. Things which have not been usual in Japan like apples will be treated with special 'respect'. Like in the case of the Japanese most expensive beef in the world, where cows are fed with apples and watered with beer and regularly massaged, apples will not be treated as something usual. This cultural aspect can also be connected with the growing of apples. As it can be seen in 'Washington State's 3,500 apple farmers produce twice as many apples as their Japanese counterparts. But Japan has more than 10 times as many apple farmers, who raise their fruit on small plots and receive high prices for the produce, primarily Fuji apples.' It seems to be more like cultural aspects. As mentioned before the difference between apple growers is more than 10 meaning that if the Japanese would like to, they are able to make big fields and mass production, but they do not do it. Of course there is a danger of using those excuses in order to protect the bad prospering of the Japanese apple market but on the other hand the Japanese prefer the quality instead of quantity and mass production of 'ugly' apples.

The strive for Japanese market by American is in this case too obvious. On the one hand it is clear that they want to be treated equally as other countries, what is more, this is ensured by the WTO agreement.

'American farmers expect our trading partners to implement trade rules fairly, and that means using rules based on science,' added Zoellick. 'We've seen others around the world block our exports with non-science based barriers, such as in Europe with beef and biotech products, and so this decision will help us in our efforts to make sure American farmers are treated fairly.'

It is true that the decision of Japan was still negative after the research was made by the US proving that the fire blight is not present in apples sent to Japan and that the distance between health and infected trees do not influence spreading of the disease. In this case the US could complain and assume Japanese protectionism. On the other hand, the US still claimed that Japan do not want US apples to reach the Japanese consumers.

'U.S. farmers send more than $390 million worth of world-class apples abroad every year, in particular from Washington State and Oregon. However, Japan's severe fire blight restrictions have essentially blocked our apples from reaching Japanese consumers; for example, U.S. apple exports to Japan were limited to only $377,000 in 2001. Removal of Japan's WTO-inconsistent import barriers would give a boost to U.S. apple farmers by providing the opportunity to increase U.S. exports.'

From a different perspective it looks like the US counts on a huge demand of US apples what is surprising after the situation when the US apples were brought in to the Japanese market and gained only short-term success and after this the sales suddenly dropped. The problem was the taste of apples which was too sour for the Japanese, who got used to delicious sweet 'perfect' apples, not the Japanese restrictions on US apples. What is more, the problems with sales of apples on the Japanese market was not only a case of the US, but also New Zealand which was shipping the apples to Japan under the similar conditions for 3 years. They also had to deal with the problem of marketing and mainly quality of apples. It shows that the Japanese market is very sensitive for the quality and very restrictive. If you want to be successful you have to fulfill the needs of very exacting customers. This can be the point why the US is trying so hard to enter the Japanese apple market. Japan can be a niche market for cheap apples and because of the population reaching over 127 millions it can be very beneficial for the US. What is more, the US can be attracted by the success in a cherry export to Japan. Because of a short seasonality the additional amount of cherries imported from the US were beneficial for both sides. What is more, the Japanese prefer domestic products and fruits but their 'appetite' for everything that is American made the cherry import very successful. The US cherries were of a very good quality and were a different type of cherries than those domestic ones. The quality of dark and sweet cherries was high enough to fulfill the customers' tastes what caused a great success of US cherries in Japan.

This dispute has 3 different impacts on a global trading community. It has an impact on trade, environment, economics and geography. The trade impact as previously mentioned is a case of blocking the trade by not allowing US apples to enter the market. What is more, this caused material losses to the US which grew the apples under the Japanese restriction and later could not enter the Japanese market. After the US entering the Japanese market it was noticed that the case is not only about delivery of the apples but also reaching a specific Japanese taste. This case had an impact on different countries like France and Canada which would like to enter the Japanese market as well. What is more, the impact on environment has to do with a possible case of species loss. The situation of a disease carried by the US apples could later damage the natural environment in Japan and cause the loss of different species of fruits. In the case of an economic impact the problem of the Japanese specifications has to be considered. The US export around 100 million boxes of apples and around 9% are exported to Asia. By the additional restrictions which are higher than in other countries, the US has to change the restrictions of some of the produced apples to fit the Japanese restrictions meaning that there is an additional cost of production that the US have to have and that the exporting process is much more complicated. Geographical impact is quite similar to the environment one. Growing apples by the Japanese border where they cannot be brought into the market because of rising Japanese specifications.

Along with time and after asking the WTO to review the US complain against Japan in 2002 in 2003 the US could celebrate the victory.

'WASHINGTON - U.S. Trade Representative Robert B. Zoellick announced today that the World Trade Organization (WTO) Appellate Body has upheld earlier panel findings that Japan's import restrictions on U.S. apples are not justified and are in breach of Japan's WTO obligations. Japan imposes severe restrictions on imported U.S. apples, allegedly to protect Japanese plants from fire blight, a plant disease. The United States, however, showed that there is no scientific evidence that mature apple fruit can transmit fire blight, and the panel and Appellate Body agreed.'

The high specifications were not based by the research but were made without real reason just to protect the domestic market how WTO Appellate Body agreed. And finally, Japan has to implement the agreements and open its market for US apples.

Different opinions mainly in the newspapers can be found about the dispute between the US and Japan. Many striking titles could be noticed at that time like: In Japan, It's Chic to Eat American Apples ; Angered by Japan's Barriers, U.S. Apple Growers Retaliate and U.S. Apples in Japan: The Shine Wears Off. What is more, lots of reports can be found. In most of the articles Japan is showed as a worst country that does not want to let the Americans' apples into the market. There were also opinions of a US researcher that proved that the US apples are safe from fire blight. Interesting thing is that every source that has been found was connected with complaints of the US and was showing the situation only from the US perspective. There was no source that would show the dispute from the Japanese point of view meaning that the US were discriminated by Japan or the US it trying to show themselves as the runt of the litter.

Finally, the idea of WTO enforces their members to follow the rules that were established and are known by every member. No one was forced to follow those global rules and each country decided if it wants to be the part of WTO. This means that Japan had to be aware that by banning US apples is an act of breaking the rules of international trade. But all cases are different and if the two countries cannot trust each other and cannot talk and come to an agreement without the third part this means that something in this case is not right. This situation like in Nematode trade dispute could have been solved in a completely different way. As in Nematode dispute, about the insects from Canada that were transported to Europe and the USA, one country - the USA trusted Canada and allowed further import when Europe banned the export with Canada what caused a material damages for Canada. The world knows many different cases related to the US-Japan apple case like a Ballast case , Banana case and Codex case . What is more, we are considering here an importance of trade and environment which are the most important and which are connected to each other. Previously mentioned cases and the US-Japan apple case are all connected with the trade and environmental issue. The problem here is - what is more important to gain: more money or safety of our environment, our planet that we are living on. By our unconsciousness of the damages that we can do to our environment by shipping different species to different places we jeopardize our planet and the variety of species. Like in the apple case, the environment was the most important issue for Japanese when for the US the new trade market. In this case there were no disasters connected with environmental impact as it was in Ballast case about zebra mussels. Once we start the environmental changes we will not be able to stop them. The apple case shows the two different approaches to the world but we will never be able to get to know the real reasons of this conflict.

List of References

1. http://ageconsearch.umn.edu/bitstream/14612/1/wp9802.pdf
2. http://www.american.edu/ted/apple.htm
3. http://www.american.edu/TED/ballast.htm
4. http://www.american.edu/TED/banana.htm
5. http://www.american.edu/TED/codex.htm
6. http://www.american.edu/TED/esp/japan-apple.htm
7. http://www.american.edu/ted/NEMATODE.HTM
8. http://www.ars.usda.gov/is/AR/archive/mar07/apples0307.htm
9. http://articles.latimes.com/1998/oct/30/business/fi-37549
10. http://www.ers.usda.gov/publications/FTS/Oct05/fts31801/fts31801.pdf
11. http://geneva.usmission.gov/press2003/0716USapples.html
12. http://www.iht.com/articles/1995/03/13/subtopics_1.php
13. http://www.ipss.go.jp/index-e.html
14. http://www.ustr.gov/Document_Library/Press_Releases/2002/May/United_States_Files_WTO_Case_Against_Japan_Over_Unfair_Restrictions_on_American_Apples.html 15. http://www.ustr.gov/Document_Library/Press_Releases/2003/December/US_Wins_WTO_Appeal_on_Japan%27s_Apple_Restrictions.html
16. http://vn-education.com/forum/index.php?topic=357.0
17. http://www.wto.org/english/tratop_e/agric_e/agric_e.htm
18. http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds245_e.htm
19. http://query.nytimes.com/gst/fullpage.html?res=9F0CE2DC1038F934A2575BC0A965958260&sec=&spon=&pagewanted=1
20. http://query.nytimes.com/gst/fullpage.html?res=9F0CE2DC1038F934A2575BC0A965958260&sec=&spon=&pagewanted=2
21. http://query.nytimes.com/gst/fullpage.html?res=990CEEDC143CF935A25752C0A963958260

O autorze:
Magdalena Zatorska

Studentka IV roku Marketingu i Zarządzania w Wyższej Szkole Biznesu-National Louis University w Nowym Sączu. Stypendystka programu Sokrates Erasmus w Danii. Od wielu lat zainteresowana Azją, w szczególności Japonią i wszystkim tym co jest związanym z krajem Kwitnącej Wiśni. Biegle posługuje się językiem angielskim, językiem rosyjskim w stopniu średnio zaawansowanym oraz językiem japońskim na poziomie podstawowym.
E-mail: mzatorska@wsb-nlu.edu.pl