Trade Agreements Deliver for the U.S. Dairy Industry

Every U.S. bilateral and regional free trade agreement the United States has signed in recent years has led to increased dairy exports.

Since the implementation of the Uruguay Round in 1995, which ushered in the World Trade Organization (WTO), U.S. dairy export value has risen nearly ten-fold to more than $6.7 billion. Since the North American Free Trade Agreement (NAFTA), enacted one year earlier, U.S. dairy exports to Mexico jumped nearly six-fold to $1.4 billion. Lowering tariffs and export subsidies in the WTO as well as opening dairy market access provisions in the deal with Mexico have been critical to U.S. dairy export success.

While the WTO and NAFTA are the highest profile of all trade agreements, every U.S. bilateral and regional free trade agreement (FTA) that the United States has signed since has also led to increased U.S. dairy exports.

There is a good reason. Strong industry participation early in the negotiating process and continuing through completion has ensured that U.S. dairy interests remain top of mind for U.S. negotiators and generally led to favorable dairy terms.

Creating more economic growth through greater trade facilitation by opening up more market access, creating better sanitary and phytosanitary rules and limiting export subsidies have provided the United States with an opportunity to become a global dairy player.

Now, we are trying to close in on our biggest FTA opportunity since NAFTA. Twelve nations—Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and the United States—are negotiating the Trans-Pacific Partnership (TPP) trade agreement.

The deal provides potential opportunity to create fully enforceable sanitary and phytosanitary rules that go beyond World Trade Organization measures, an achievement that would help turn back the rising tide of non-tariff trade barriers. It also presents an opportunity to address the lingering impacts of New Zealand government dairy policies that have intentionally advantaged a single national champion at the expense of other competitors. One more challenge that TPP must also tackle is how to provide better protections to common food names through improvements to rules for registering geographical indications.

The U.S. Dairy Export Council (USDEC) devoted ample work to advancing the above elements prior to the inclusion of Canada and Japan in TPP. Canada’s involvement offers a chance to repair the exclusion of dairy in the U.S.-Canada portion of NAFTA and establish systems to prevent technical barriers to trade that have frustrated U.S. efforts to export there for years.

Japan’s involvement not only offers the opportunity to reduce tariffs to an important market, but also provides a chance to correct a host of non-tariff trade barrier issues, such as the rules around the operation of the country’s import licenses and tenders.

Opening those two large and profitable markets alone, not to mention gaining market access benefits to Malaysia and Vietnam, would provide immediate and measurable benefits for U.S. dairy producers and processors.

But FTA progress can be frustratingly slow, and now we are at a crossroads on TPP, in large part due to Japanese demands to deny meaningful market access for five agricultural sectors, including dairy. The inability to resolve the issue is widely regarded as holding up the rest of the negotiations. Japan access is particularly important because Canada will likely base its TPP dairy market access positions on Japanese commitments.

Crafting a trade agreement that would minimize tariff elimination and reduction in dairy and other ag sectors would not only drastically limit access for U.S. farmers, it would create a domino effect with other countries moving to reset their market access offers to mirror those of Japan, compromising the U.S. benefits package with current and future TPP members.

Yet, seeking blindly a flawless agreement may not necessarily be in the U.S. dairy industry’s best interest. I have repeated the Voltairian aphorism before in reference to U.S. trade negotiations and it remains apt today, “Don’t let the perfect be the enemy of the good.”

USDEC has been at the TPP table since day 1 and the unified U.S. dairy industry again made its voice heard recently in June, when 39 dairy companies sent joint letters to U.S. Ag Secretary Tom Vilsack and U.S. Trade Representative Michael Froman emphasizing the need to secure meaningful dairy market access to Japan and Canada, as well as to address the New Zealand policy issues mentioned above.

USDEC initiated and backed that letter and fully agrees that TPP must remain a high-standard trade agreement. At the same time, we need to make sure that we do not leave a very good agreement on the table because we are holding out for an ideal agreement. In the same vein that it is better to have no deal than a bad deal, it is better to have a very good deal than no deal. We are eager to conclude TPP and see the benefits to trade that a good deal could bring. This will give us an opportunity to match the European Union’s aggressive global trade agenda.

We need to build support and generate momentum to make sure TPP—as well as the Transatlantic Trade and Investment Partnership (TTIP)—carry on the tradition of all the other U.S. FTAs and deliver benefits to U.S. dairy that help us further expand our global presence. And it is equally important to not lose ground to the European Union and other dairy export nations concluding trade agreements all around the world.

(This article first appeared in the October 14, 2014, issue of Cheese Market News.)

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The U.S. Dairy Export Council is primarily supported by Dairy Management Inc. through the dairy farmer checkoff that builds on collaborative industry partnerships with processors, trading companies and others to build global demand for U.S. dairy products.