U.S. Dairy Export Council and National Milk Producers Federation, which represent the majority of U.S. dairy farmers and processors, Tuesday threatened to pull their support for the pending Trans-Pacific Trade (TPP) agreement.
At issue is comprehensive market access for U.S. dairy exports in Japan and Canada. Those countries have thus far refused to follow through on their pledges to provide that access when they joined the TPP talks, according to the two organizations.
In a letter to U.S. Trade Representative Michael Froman and USDA Secretary Tom Vilsack, the groups stated Japan and Canada aren’t living up to the ambitious trade goals they obligated themselves to upon joining TPP negotiations.
The groups urged Froman and Vilsack to insist the TPP agreement, being negotiated by 11 countries, results in meaningful U.S. access to Japan and Canada.
Japan and Canada have long had high tariff barriers impeding access to their markets. Neither country is eager to integrate their dairy sector into global dairy markets in the way the U.S. has done over the past several years, said Shawna Morris, vice president of trade policy for USDEC and National Milk.
“That is why TPP presents such an invaluable opportunity to crack those markets,” she said.
Canadian dairy tariffs typically range from 250 percent to 300 percent for most dairy products. Japanese dairy tariffs are also extremely high for many products, including butter and milk powders. Japan’s cheese tariffs are more mid-range but still place a sizable constraint on the trade that could otherwise take place, she said.
In addition to comprehensive market access, USDEC and National Milk urge negotiators to address the lingering impacts of government policy in New Zealand that have internationally advantaged Fonterra at the expense of other competitors.
Early last decade, the New Zealand government abolished its dairy state-trading enterprise that fully controlled all of the sector’s dairy exports and instead passed special legislation to allow for the creation of a company that consolidated approximately 95 percent of the country’s milk supply. Fonterra was also awarded exclusive access to licenses that allowed it to ship products to high-value markets for several years, Morris said.
Those sizable benefits and residual benefits have provided unique advantages to Fonterra that give it a leg up in competing against other dairy companies — both domestically and internationally. Today, Fonterra controls about 90 percent of the country’s milk supply, she said.
“We want to see TPP address the remaining impact of those policies that have encouraged such sizable levels of market concentration in New Zealand’s dairy sector in order to better position one firm to compete internationally,” she said.
TPP trade talks were launched in 2010, and TPP countries are working to bring negotiations to a close — ideally this year. But Morris said significant challenges remain, particularly in critical areas of market access.
Typically, free trade agreements are sent to Congress for strictly up or down votes that forbid Congress from amending them, she said.
“Our hope is that by making our expectations clear, we are able to secure a good agreement that will allow us to lobby actively for congressional passage of TPP when the agreement reaches that stage,” she said.