7 USDEC strategies opening doors in China and Japan for U.S. dairy farmers

China waives a retaliatory tariff on U.S. permeate for feed, illustrating how addressing global problems can benefit our dairy farmers.

Editor's note: This blog post is based on an article that first appeared in MILK magazine. Secretary Vilsack made similar points in a letter to USDEC members.

As our farmers look to the future, it makes sense to gaze across the Pacific Ocean, where consumers are adding dairy to their traditional Asian diets. Demand is increasing for cheese and dairy ingredients made from milk.

Asia's dairy problem: Farmers in these countries can't produce enough milk to fully meet the domestic demand. 

Our U.S. dairy farmers produce an abundance of what Asia needs. That's why the checkoff-funded U.S. Dairy Export Council I oversee is vigorously knocking on doors of opportunity in Asia.  

USDEC was one of several co-sponsors of the China Dairy Industry Association's annual meeting, a business gathering and spectacle in Shijiazhuang that showcased the increasing importance of dairy to the world's largest country.  

What I experienced on an Aug. 28-Sept. 3 trip to China and Japan confirmed that our long-term strategies are on the right track. What's more, opportunities exist for immediate wins for our dairy farmers, even as our government continues trade talks with China and Japan.

Win for farmers: Tariff lifted on U.S. permeate

Effective today, China is waiving a retaliatory tariff on a nutritious U.S. dairy ingredient for pigs. Permeate for feed (protein content 2%-7% by weight, lactose content 76%-88%) sold under HS 04041000 will revert to its pre-retaliatory tariff rate of 2%.

This is just for permeate, not all U.S. dairy products and ingredients. But it's a significant breakthrough nonetheless. Our permeate can now compete on a level playing field in a nation that produced and consumed roughly half of the world’s pork last year. On my recent trip, I made the point to government officials that the Chinese can use our permeate to quicken the rebuilding of a pig herd decimated this year by African swine fever.

Trade policy challenges

China has a population of 1.4 billion, Japan 127 million. Together, that’s more than four times the number of mouths we feed in this country.

The potential for increasing our exports is obvious but trade policy issues pose challenges.

Most notably, Chinese retaliatory tariffs have been a weapon in a trade dispute with the United States, with our overall dairy exports to China falling 43% in the year since new tariffs began. In Japan, we see New Zealand and the EU seizing a competitive advantage through new free-trade agreements that tilt the playing field against us.

Multi-pronged approach

At USDEC, we utilize membership dues to tackle these challenges head-on, fighting for dairy-friendly trade policy in Washington, Beijing, Tokyo and other capital cities around the world.

We also have overseas boots on the ground paving the way for our exporting companies to do more business, thanks to generous checkoff support from Dairy Management Inc. and our state and regional dairy organizations. 

The following strategies were on display during my recent trip:  

Seven USDEC strategies in China and Japan

1. Keep building relationships.

In China I met with government officials at the Ministry of Finance and Commerce (MOFCOM) and addressed the China Dairy Industry Association. In the midst of a trade war, I realized there would be little interest in the usual discussion about the benefits of U.S. dairy products as ample, nutritious and safe. I decided to approach the meeting and prepare my presentation in a way that reflected our desire to maintain positive relationships that come up with win-win solutions.


Speaking at the China Dairy Industry Association annual meeting, USDEC President and CEO Tom Vilsack encouraged collaboration between the U.S. and Chinese dairy industries.   

2. Creatively solve problems. 

In meetings and speeches, I offered a way the U.S. dairy industry can help China's pig herd recover. Research shows that more permeate given to piglets in a higher ratio results in faster growth. We also know that more whey protein given to lactating sows results in more pigs per sow.

After my return, I followed up with a letter. I'm pleased to say that on Sept. 11, the Chinese government said it is waiving its retaliatory tariff on U.S. permeate for feed use, effective today (Sept. 17). In a country where a plummeting supply of pork is inflating prices, USDEC found a path to address a significant problem.

This was and remains a team effort. USDEC staff in the U.S. and China have been working on a tariff exemption application for some time. In the coming weeks, USDEC will host two seminars in China about strategic approaches to using permeate to help the hog industry. If our permeate exports to China increase as expected, that's a win-win for China and our dairy farmers.

3. Emphasize our sustainability commitment.

I raised the challenge of climate change in China and the opportunity it presents to the global dairy industry. I spoke of the commitment our farmers to reduce emissions. In addition to helping the earth, sustainability can give us a global marketing advantage.

4. Encourage free-trade agreements.

When the EU completed its free trade agreement (FTA) with Japan and when the Trans-Pacific Partnership (without the U.S.) went into place, our competitors in the EU and New Zealand gained an immediate competitive advantage. Many of their tariffs fell to zero. Ours didn’t, and our tariffs remained in place. USDEC continues to push for a free-trade agreement to rectify this and I am hopeful that a “mini” FTA recently announced will soon go into effect in Japan so the world's largest cheese exporter can trade freely with the world's largest cheese importer.

5. Develop win-win partnerships.

Curves runs nearly 2,000 women’s fitness centers in Japan with a focus on seniors. To combine exercise with nutrition, many members get a monthly supply of whey protein. Nearly half of the whey protein sold by Curves comes from the United States. The company is now opening fitness centers for men in Japan and is expanding to other Asian markets. Our U.S. dairy ingredients will go with them.


Many Japanese consumers are focused on health and wellness, which creates demand for dairy ingredients like whey protein.  

6. Promote the quality and heritage of U.S. cheeses.

The Japan cheese market continues to grow, hitting record imports for four years in a row. My visit with Chesco (owner of 10 cheese stores and a marketer to high-end grocery and department stores in Japan) convinced me a new program with them will succeed. Later this year, Chesco will introduce up to eight American cheeses in high-end grocery and department stores.

You may have heard what happened when Costco opened its first location in in mainland China on Aug. 27. Its Shanghai store was so inundated with eager shoppers it had to close due to security concerns. The next day, Costco began limiting the number of shoppers to 2,000 at a time. 

USDEC staff was at the grand opening celebrating a new partnership with Costco that we brokered, resulting in seven U.S. cheeses put on display for Chinese consumers. 

Customers lucky enough to get into the Costco grand opening in Shanghai saw cheeses made in the U.S. from Belgioioso, Sartori, Tillamook, Pacific Cheese, Saputo, Schuman Inc. and Lactalis -- thanks in part to a new partnership facilitated by USDEC. #USDairyChina #UndeniablyDairy pic.twitter.com/ZjyxMXMzdh

— U.S. Dairy Exporter (@USDairyExporter) September 3, 2019

7. Teach future chefs about U.S. cheeses.

At Hattori Nutrition College in Tokyo, 115 up-and- coming chefs finished the first level in our USA Cheese Specialist™ Certification Program. We are building a generation of chefs and food industry leaders in Japan and elsewhere who will be educated in the quality, versatility and capacity of U.S. cheeses. 

Yukio Hattori of "Iron Chef" fame addresses students at Hattori Nutrition College.

Competing to win for dairy farmers

To sum it up, what I saw on my recent trip increased my confidence that smart strategies are putting U.S. dairy farmers and our entire industry in a position where we will compete to win in China, Japan and around the world.

Tom Vilsack is president and CEO of the U.S. Dairy Export Council. 

Learn more:

• Vilsack optimistic about exports after China, Japan trips
• Travelogue: Vilsack takes U.S. Dairy message to China, Japan
• Vilsack in China: U.S. dairy industry building relationships for ‘long haul’
• (8 Photos) Chinese Student Creativity Shines at USDEC Dairy Competition with Jiangnan University
• Tariffs as High as 45% Inflict Risk on Chinese Food Companies, Pain on U.S. Dairy Farmers
• (12 Photos) U.S. Ambassador Sends Goodwill Message to China's Food Industry at Conference, USDEC Reception
• Prediction: China will Become the World's Big Cheese
• U.S. Dairy's Momentum in China Threatened
• U.S.-China Dairy Partnership Launched to Meet Future Demand for Nutritious Products (VIDEO)
• USDEC Goes to China to Expand Dairy Trade
  
  

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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.