TPP: Moving in the Right Direction

The gavel fell on the 11th round of the Trans-Pacific Partnership (TPP) free trade talks March 9, 2012, in Melbourne, Australia. While negotiators still need to resolve many issues, the prospective deal could evolve into a far better proposition than when U.S. Trade Representative Ron Kirk first announced U.S. participation in 2009.

In fact, what began as an endeavor that seemed to offer little if any upside to the U.S. dairy industry is moving towards a potentially significant treaty that holds the possibility of not only lowering tariff barriers in key U.S. dairy export markets, but also takes a big step toward stemming the epidemic of non-tariff barriers to trade.

From the very beginning, our government stated that its goal was to expand the TPP from the initial participants—Australia, Brunei, Chile, New Zealand, Peru, Singapore, and Vietnam (which started only as an observer)—to create what Ambassador Kirk called “the largest, most dynamic trade collaboration of our time.”

With so few members, and with the United States already having free trade agreements with four of them (Australia, Chile, Peru and Singapore), the USTR’s description sounded like wishful thinking.

But Vietnam quickly became a full-fledged participant and Malaysia joined the talks. Then late last year, just before the November announcement that the nine current TPP participants had agreed on the “broad outlines” of a deal, Canada, Japan and Mexico said they wanted to take part.

Japan and Canada, the 3rd and 10th largest economies in the world, respectively, present huge potential for new dairy business. Even with significant impediments to market access, Canada was the No. 2 U.S. dairy export market by value in 2011 and Japan the No. 5.

If we were to remove existing market access barriers and improve and harmonize sanitary and phytosanitary (SPS) rules, it would dramatically increase the commercial significance of the talks for U.S. dairy suppliers.

All three countries are worthy additions to the negotiations—with some caveats. Japan would need to loosen its restrictive market access scheme, liberalize its complex quota system and address non-tariff trade concerns, such as how its food additive approval system currently operates.

Canada must be willing to finally negotiate fully comprehensive market access provisions in dairy and ensure that it would not block U.S. trade with non-tariff trade barriers. Canada and Mexico together would represent further integration of North America—a very important goal.

The extent to which Canada and Japan are willing to reform is unknown. All three nations are currently discussing with existing participants how and when they might take a seat at the table. Japan’s interest is especially notable, because it may not present itself again. Japan is almost certain to enter into free trade talks with the European Union this year and will be looking to negotiate with other countries if its TPP bid is rejected.

The clock is ticking. Negotiations among current members are proceeding along a separate track from a decision on the new entrants with the expressed goal to complete the text of the agreement this year.

That is an ambitious target, but trade officials made significant progress in the Australia round, and Round 12 is slated for Dallas in May.

And even if current members put off Canada, Japan and Mexico, the TPP FTA could still deliver important benefits to U.S. dairy suppliers by definitively addressing a number of major non-tariff issues. Of course, potential benefits must outweigh our existing concerns, but some important elements are underway in this area.

First, U.S. negotiators, following an idea originally initiated by USDEC, are well down a path to establishing an enhanced SPS pact that will facilitate trade for all agricultural products. The deal would set more specific obligations to protect against unjustified obstacles to trade and create greater reliance on science and international standards setting bodies, encourage harmonized import documentation and provide for stakeholder consultations prior to implementing new rules.

Second, TPP could be a vehicle to establish a bulwark against the EU’s aggressive efforts to expand its over-reaching geographical indication system to restrict commonly used product names, like parmesan and feta.

And just last month, USDEC sent Ambassador Kirk and Ag Secretary Tom Vilsack a letter and confidential report detailing the impact of New Zealand dairy policies on the U.S. industry as well as a handful of small competitors that have struggled to gain a toehold in the country. It is critical that the United States addresses issues related to competition in global dairy markets. This is why USDEC members remain very concerned about expanding U.S.-New Zealand dairy trade.

Trade deals are not just about market access anymore. Over the past decade, we’ve seen non-tariff barriers hinder U.S. export efforts as much as excessive duties. The TPP FTA offers an opportunity to ease U.S. entry into major markets and to establish a template for all future trade deals—beyond the Pacific Rim—addressing non-scientific health requirements, unwarranted certification procedures and other non-tariff concerns limiting U.S. potential.

It could become a means for the United States to address unresolved issues left over from the dormant Doha Round of World Trade Organization talks. Portions of its text could be applied to other agreements to facilitate U.S. dairy trade across the globe.

Now our negotiators need to seize the potential in front of them to turn these possibilities into concrete realities.

(This article first appeared in Cheese Market News in March 2012.)

The U.S. Dairy Export Council represents dairy farmers, proprietary processors, cooperatives, ingredient suppliers and export traders. Its mission is to enhance U.S. competitiveness and increase global sales of U.S. dairy ingredients and products.