The U.S. Dairy Exporter Blog: Market Analysis, Research & News
  • How Free Trade Agreements Ignited U.S. Dairy Exports to 6 Countries

    By USDEC January 28, 2016

    Mexico tops the list, showing a 558% increase over a 10-year period.

    Editor's Note: This is the second of a two-part series examining a report on the impact of past Free Trade Agreements on the U.S. dairy industry. Also see, "Free Trade Agreements Helped Bring $8.3 Billion to U.S. Dairy Over 10 Years."

    In the decade following implementation of the North American Free Trade Agreement (NAFTA), U.S. dairy exports to Mexico have increased from $250 million to $1.6 billion.

    free_tradeThat makes Mexico the U.S. dairy trading partner most positively affected by Free Trade Agreements between 2004 and 2014, according to a report by the U.S. Dairy Export Council and the National Milk Producers Federation.

    Overall, FTAs helped bring an additional $8.3 billion to the U.S. dairy industry from all countries studied during that period. That number includes increased dairy farmer income due to rising demand.

    "Obviously, Free Trade Agreements have delivered in a big way for the U.S. dairy industry," said USDEC President Tom Suber. "Continued efforts are needed to forge new agreements, expand market access and stay competitive. Other dairy-exporting nations are trying to gain an advantage with their own agreements, so we can’t rest on our laurels."

    USDEC and NMPF are still carefully examining the full text of a Trans-Pacific Partnership agreement released by the Obama administration, said Jaime Castaneda, senior vice president of trade policy at the U.S. Dairy Export Council. This study by USDEC and NMPF did not assess the potential impact of TPP.

    The study did clearly show past Free Trade Agreements have been positive for the U.S. dairy industry.

    The impact of entering into a Free Trade Agreement was estimated by comparing a trend projection based on exports prior to entering into the agreement with actual exports following implementation, said NMPF economist Peter Vitaliano, who conducted the study. 

    Based on dollar value of sales, here are the six countries most positively affected since Free Trade Agreements were implemented. Charts following this list show trade date from nine additional countries importing U.S. dairy products. 


    1. Mexico: After the implementation of the North American Free Trade Agreement (NAFTA) in 1994, U.S. dairy exports to Mexico (the largest U.S. dairy export destination) have increased by 558%. U.S. dairy and dairy products exports increased from totaling $250 million in 1993, to a total of $1.6 billion in 2014. The most significant growth in dairy product exports to this market was in non-fat dry milk, where U.S. exports increased from totaling $85 million in 1993 to a total of $775 million in 2014 (an increase of 809%).

    U.S. exports to Mexico are fairly diverse. Although non-fat dry milk accounted for a sizable 47% of the total of U.S. dairy exports to Mexico last year, a majority of shipments were of a variety of other dairy products. Regular discussions between trade and regulatory officials have helped ensure a relatively smooth functioning of trade with this important FTA partner and provided a forum for resolving issues when they have at times arisen.


    2. South Korea: For the U.S.-Korea Free Trade Agreement (KORUS), market access for dairy products took place through a combination of tariff elimination and expansion of TRQs. For dairy products, there was tariff reduction for some products but most products face expanding TRQs with phase out periods of 5-15 years. U.S. dairy exports to South Korea have increased from $223.7 million in 2011 (before the entry into force of the agreement in 2012) to $416 million in 2014, an increase of 86%.

    Most of the growth has been in exports of “Cheese and Curd”, which represent 75% of U.S. dairy exports to this market and have increased by 116% from 2011 to 2014. The agreement, the first South Korea negotiated with a major dairy supplier, proved to be especially critical in ensuring that the U.S. did not lose ground competitively given that South Korea subsequently proceeded to negotiate FTAs with the EU, Australia and New Zealand, the U.S. dairy industry’s three major global competitors. Had the U.S. not had its own agreement in place, we could have been at risk of seeing a loss in market share rather than the significant export gains that have resulted from the agreement.

    australia3. Australia: The U.S.-Australia Free Trade Agreement (AUSFTA) entered into force on January 1, 2005. With this agreement over 99% of U.S. exports of consumer and industrial goods became duty-free. Since the inception of the agreement, U.S. dairy exports have increased 3,012%, from totaling $5.6 million in 2004 to total $173 million in 2014. The dairy product category that has seen the highest level of growth has been “Cheese and Curd” (which in 2014 represented 51% of total U.S. dairy exports to Australia), growing by 13,246% from 2004 to 2014.

    A key factor in the positive impact this agreement has had on the U.S. dairy industry has been not only how Australian dairy tariffs were handled, but also the care taken with how U.S. dairy tariffs were treated under the agreement. Additionally, it is important to note that a severe draught following the close of AUSFTA impacted trade dynamics between the U.S. and Australia by negatively impacting Australian production at a time when U.S. production was growing.


    4. Singapore: U.S. dairy products enjoyed duty free access to the Singapore market even before the entry into force of the U.S.-Singapore FTA in 2004. However, trade has continued to expand in this market with U.S. dairy exports increasing from totaling $8.1 million in 2003 to $99.9 in 2014, an increase of 1,132%.  


    5. Morocco: Most dairy products under the U.S.-Morocco Free Trade Agreement (entered into force on January 1, 2006) have a duty elimination phase out period of 15 years. This means that they will be duty free by January 1, 2020. For dairy products, Morocco has been the FTA partner that has presented the highest level of growth on a proportional basis. U.S. dairy exports increased from totaling $64,499 in 2005 to total $97.1 million, an impressive increase of 150,437%. The main products exported to this market from the U.S. are whey (36% of U.S. dairy exports in 2014) and butter and milkfat (34%). 


    6. Chile: For the U.S.-Chile Free Trade Agreement, which entered into force on January 1, 2004, most tariffs for agricultural goods were almost completely eliminated, with the last year of the phase out period being 2015. U.S. dairy exports have increased from totaling $2.6 million in 2003 to totaling $60.2 million in 2014, an increase of 2,225% since the agreement’s implementation. 51% of the U.S. Dairy exports to Chile were in “Cheese and Curd”, which grew by 2,237% from 2003 to 2014.

    The growth from such a minimum starting point helps illustrate the importance of cultivating markets over time, coupled with well-negotiated trade agreements. The expansion of U.S. dairy exports to Chile is all the more notable given that Chile is a competitive dairy producer in its own right. An important non-tariff element of the U.S.-Chile FTA was the establishment of a regulatory pathway for the U.S. to provide a list of plants intending to ship to Chile. This measure removed a regulatory barrier that had previously made it much more cumbersome in practice for U.S. dairy facilities to get approved by Chilean authorities to ship to Chile. This non-tariff element of the agreement was a critical factor in ensuring that U.S. companies would actually be able to take advantage of the opportunities that the elimination of tariffs introduced.

    Data from more U.S. trading partners, listed alphabetically

    The impact of FTAs goes beyond the six countries listed above.

    The following charts show Vitaliano's estimates for incremental export sales (i.e., how much more than otherwise) that resulted from the respective Free Trade Agreements, both in total milk solids product volume and dollar value of sales. Here is his comprehensive country-by-country analysis:  

    Volume Increase in U.S. Dairy Export Sales of Key Dairy Products Due to Free Trade Agreements  
    (Millions of lbs, milk equivalent, total milk solids basis)
    FTA Partner 2004  2005  2006  2007  2008  2009  2010  2011  2012 2013 2014
    Australia     8  94  120  162  63  288  315  262  474 546
    Bahrain         1  48   2   22  30    60    82   95
    Chile 36  44  39  85  127  37  116  149  250  169 174
    Colombia                    22    27 154
    Costa Rica             5     8     8      15      10     13 
    Dominican Republic        20   87   61  69   76   124    92  113
    Honduras      46   0   51     5    10    28    43      21 
    Jordan    4    0    3    1      9    12     15      7    27    14    8
    Mexico 528 789 577 1,248 1,541 1,371 1,860 2,448 2,755 2,696 3,110
    Morocco      40   119  301   59   151     151    218   334    275 
    Nicaragua                   11     4    28
    Panama                      50     16 
    Peru           0 111  43 131  100    94 
    Singapore 126 131 211 137 187 139 222 306 338  353 408
    S. Korea                 129  345 522
    Grand Total 693 971 1,011 1,731 2,514 1,754 2,873 3,562 4,385 4,751 5,578


    Dollar Increase in U.S. Dairy Export Sales of Key Dairy Products Due to Free Trade Agreements
     (Millions of dollars)
    FTA Partner  2004  2005  2006  2007  2008  2009  2010  2011  2012 2013 2014
    Australia    0.5  6.0  18.8  24.2  5.5  35.6 60.1  69.7 100.3  132.2
    Bahrain         0.3   8.9  0.8   5.4  8.2  17.2  24.3   24.8 
    Chile  3.4  3.7  4.0  13.5  21.5  5.4  19.3  31.3  51.2  40.6  44.3
    Colombia                   5.0   7.6   38.5 
    Costa Rica            0.6   1.4   1.8   3.8   2.7     4.3 
    Dominican Republic        3.0  15.8  9.6


    17.4  26.7  25.9   31.4 
    Honduras       6.3    10.8  0.9  2.0  5.9   9.6      5.8 
    Jordan     0.9       0.4     0.4     2.5    1.8    3.5    2.5     6.1     4.5    2.9
    Mexico  64.6  103.6  75.7  244.0  318.8  200.3  314.6  498.9  562.6  641.3  766.5
    Morocco      3.8  17.4  47.1  7.3  30.3  36.4  45.2  74.2   61.7 
    Nicaragua                   2.0   0.8   5.2
    Panama                    15.7    5.7 
    Peru               17.3   8.8  25.2  21.9  22.5
    Singapore  10.4  13.3  17.7  21.4  26.4  15.1  28.4  56.8  68.5  69.1  79.1
    S. Korea                  30.5  85.2  150.2
    Grand Total  79  121  114  319  476  247  471  728  923  1,114  1,375

    Learn more about Free Trade Agreements:

    To download a printable pdf version of the joint report by USDEC and NMPF on the impact of free trade agreements, click here

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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. 

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