Import Demand for Quality in Japanese Beef Markets

The case of reduction in ad-valorem tariff as the trade liberalization policy is considered. It was showed that it leads to higher quality of imports, ceteris paribus. This hypothesis was tested on the case of Japanese beef imports from the United States and Australia. US beef, according to the results of a Gallup’s survey, is considered by consumers in Japan the high-quality product while Australian beef is considered the low-quality product. Empirical results support the hypothesis. Moreover, the recent domination of the US beef in Japanese market is further explained by increasingly more efficient US beef production relative to Australian production and strong income effect where higher per capita income leads to more demand for higher quality products.