The U.S. Dairy Exporter Blog: Market Analysis, Research & News

  • Three Reasons U.S. Dairy Supports TPP

    By Shawna Morris April 27, 2016

    Remedies for non-tariff barriers outweigh market access gains. 

    The Trans-Pacific Partnership (TPP) trade agreement is not a perfect trade deal for U.S. Dairy, but it is one that merits the industry’s support—provided rules are in place prior to implementation to ensure that it plays out in practice as expected on paper.

    TPP4-008809-edited.jpgThe TPP market access provisions for Canada and Japan fall short of the full market opening the U.S. industry pushed so hard to achieve. The provisions are one reason why it is so important to insist that the U.S. Trade Representative (USTR) hold both countries, as well as other parties, to related TPP commitments. TPP implementation and enforcement issues are key to the deal living up to its potential to create improved trade opportunities for the U.S. dairy industry.

    With work to address those issues underway, the U.S. Dairy Export Council (USDEC) Board of Directors voted on April 7 to support TPP. USDEC and the National Milk Producers Federation have worked closely together throughout the negotiations and are united in urging Congress to pass the agreement this year.

    Why this support for TPP from the U.S. dairy industry? Three primary reasons:

    1. The TPP agreement is the first trade deal to include rules and disciplines on sanitary and phytosanitary (SPS) measures that go beyond those contained in the World Trade Organization’s (WTO’s) SPS Agreement.

    U.S. agricultural suppliers increasingly face arbitrary, unjustified and oftentimes sudden regulatory decisions by importing nations that constrain our exports, and our current means of recourse are insufficient.

    “We needed to build a better model to tackle SPS issues and the unwarranted and abrupt imposition of regulatory measures,” says Jaime Castaneda, USDEC senior vice president, trade policy. “The TPP agreement does that.”

    TPP achieves important SPS improvements in the areas of science and risk analysis, equivalence, import checks, transparency and the establishment of a consultative mechanism intended to provide a means to resolve SPS problems expeditiously.

    The consultation mechanism brings together policy makers and regulators from the countries involved in a dedicated, formalized process when an issue arises. It provides an option between regular day-to-day discussions and the expensive and time-consuming WTO dispute settlement process. But it is also back-stopped in most cases by recourse to TPP’s dispute settlement provisions in order to help ensure that TPP parties do not take their new SPS obligations lightly.

    The transparency provisions of TPP provide more lead time to identify new regulations or revisions to regulations coming down the pike, giving the United States more time to comment on and possibly shape those regulations rather than having mandates drop out of the sky.

    2. The TPP agreement’s geographical indication (GI) provisions break new ground by moving closer to a more balanced international model for GI registration.

    This fills a void that the European Union (EU) has exploited to erect non-tariff trade barriers and limit competition from U.S. cheese suppliers, among others.

    “The provisions are not a silver bullet that puts the GI issue to rest, but they do significantly improve the tools we have to combat the EU’s aggressive tactics,” says Castaneda.

    The provisions ensure that any names the EU is seeking to protect go through an evaluation process, giving the U.S. industry and government time to explain to other countries why certain terms don’t deserve recognition as GIs, as well as where such acceptances would be inconsistent with prior U.S. trade commitments, while clarifying the full scope of intended protection.

    3. The TPP is poised to expand.

    It began expanding even as negotiations were taking place. Vietnam joined the talks in 2008. Malaysia enrolled in 2010. Canada and Mexico entered in 2012, and Japan came on board in 2013.

    Already, Indonesia, the Philippines, Taiwan and Thailand have expressed serious interest in joining. This a deal that will grow and offer an expanding range of market access opportunities, while building on the same underlying set of SPS and GI rules.

    Those latter four countries would add another 450 million consumers to the pool, a huge jump in potential customers. Currently, all four are free trade agreement (FTA) partners with New Zealand and three are FTA partners with Australia. The Philippines, our No. 6 export market by value, recently entered FTA talks with the EU.

    “We are already at a competitive disadvantage with key competitors, and that disadvantage could worsen if the United States fails to keep pace with the aggressive trade expansion agendas of Oceania and Europe,” says Castaneda. “We need to ensure the United States has a robust presence in the Asia Pacific markets, so we have an opportunity to advance a trade agreement that benefits U.S. dairy suppliers.”

    TTP acceptable, though not ideal

    The groundbreaking SPS and GI provisions are concrete elements that should not only prove helpful in the current TPP region but also as it expands outward. But despite their potential value, they would have been woefully insufficient if the deal resulted in an unbalanced market access outcome that disproportionately opened U.S. doors to our competitors without commensurate new access for U.S. suppliers elsewhere.

    A joint USDEC-NMPF comprehensive evaluation of TPP found that even though it fell short of providing the level of access our industry sought to the highly-protected markets of Canada and Japan, the net effect of all market access concessions was expected to be neutral to slightly positive for U.S. dairy.

    It is not the ideal result but acceptable in this case, given the non-tariff advances.

    In approving the agreement, however, USDEC also stressed that it could not envision another subsequent agreement clearing this bar without delivering the type of comprehensive market access results seen in prior U.S. FTAs for dairy.

    Enforcement of Canada and Japan crucial

    Support also comes with another critical message: In order to ensure that the intent of the agreement squares with its results in practice and that TPP advances U.S. opportunities compared to today’s status quo, the administration must insist that TPP parties, particularly the major markets of Canada and Japan, abide by both new and existing trade obligations.

    “Countries cannot be allowed to backtrack on existing market access agreements and essentially take away with one hand what they gave with the other,” says Castaneda.

    In addition, the U.S. government must ensure TPP trading partners act in accordance with the deal’s GI stipulations and ensure active enforcement of specific provisions on market access to the United States. The House reinforced that need last week sending a letter signed by 47 representatives, including leaders of the House Ways & Means Trade Subcommittee and the ranking member of the House Agriculture Committee, calling for the Obama Administration to take concrete steps to address implementation and enforcement issues related to TPP’s dairy provisions. (The House message echoes a joint letter USDEC, NMPF and the International Dairy Foods Association sent to Ambassador Froman and Secretary Vilsack on April 19.)

    Careful attention to these critical implementation and enforcement issues will assure that hard-won TPP market access, SPS and GI commitments are not undermined by key trading partners.

    Bottom line: TPP helps U.S. Dairy compete globally

    Over the last two decades, U.S. dairy exports have grown from less than a billion dollars of mostly government-assisted shipments to as much as $7 billion of commercial sales accounting for around 15 percent of the U.S. milk supply. Based on world demographic projections, it is evident the industry’s future health is intertwined with global trade.

    The TPP agreement, if fully implemented and enforced, has the potential to create trade opportunities and support robust growth for the U.S. dairy industry, as well as strengthen the U.S. role in regional and global trade policy. It will help us compete in a marketplace in which we need to continue to grow as a player, and it warrants support from our industry.

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    The U.S. Dairy Export Council fosters collaborative industry partnerships with processors, trading companies and others to enhance global demand for U.S. dairy products and ingredients. USDEC is primarily supported by Dairy Management Inc. through the dairy farmer checkoff. How to republish this post. 

     

    Trade Policy TPP Geographical Indications (GIs) Free trade agreements
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