The Long and Winding Road

April 01,2011
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Finally.

At long last, the U.S. Department of Agriculture has finished a marathon that started back in 2001, when NMPF first asked Congress to extend the dairy promotion checkoff to imports. After two farm bills, a glacial, three-year regulatory review, countless rhetorical salvos, and the figurative cloud of dust always kicked up by prolonged skirmishes, the finish line is now in sight.

I’m going to start this column by reiterating why the import assessment is appropriate, and why we pushed for it in the first place. It’s also worth asking an equally important question – why not?

First, the rationale for extending the domestic dairy checkoff. When the national dairy promotion program was initially created back in 1983, imports were a smaller portion of domestic consumption than they are today. Overall global dairy trade was much smaller. So not only was the checkoff not applied to imported products, it wasn’t even applied beyond the continental 48 states.

But times have changed. Import shares have grown as a portion of the entire domestic U.S. dairy market, which has also grown. U.S dairy farmers have spent billions over the past 27 years to build a compelling case for the consumption of cow’s milk, in its various forms. Importers of foreign cheeses, as well as specialty ingredients, have benefited from the huge surge in per capita cheese consumption. They’ve also benefited from all of the other nutritional studies, ingredients R&D, public relations campaigns, processor and retailer alliances, and related activities funded by checkoff dollars. Consumer advertising has given way to strategic marketing initiatives that work to lift dairy consumption overall.

And yet, not a single dollar has been spent by importers to help in these efforts. They are the classic example of the free-rider phenomenon. Foreign dairy products profit from our market, but rely on U.S. dairy farmers to promote it. In two successive farm bills, Congress has said that it’s time to end this free lunch for foreign dairy interests.

Even setting aside the fact that other commodity checkoffs created since 1983 apply their levies to foreign imports ranging from cotton to pork, it’s a matter of basic fairness that those who are enjoying a seat at the table need to help cover the tab. Maybe not proportionally – the new import assessment is certainly not proportional, unfortunately – but nonetheless, they need to contribute something. Anything less is the perpetuation of an injustice. The whole concept of mandatory checkoffs is that they allow for a shared contribution on the part of those who ultimately have a stake in a shared, successful economic outcome. What’s more, importers will be given representation on the National Dairy Board so their perspective is recognized.

These are the arguments that we made, repeatedly – at times ad nauseum – to lawmakers on Capitol Hill, as well as agricultural and trade regulators in two different administrations. Finally,
this perspective has prevailed. To his great credit, Agriculture Secretary Tom Vilsack recognized the need to resolve this issue, and he and his staff pushed the import assessment through to fruition.

And why shouldn’t this have been achieved far earlier? That’s the real question. Opponents’ arguments centered on far-fetched fears about trade battles and retaliations, although, as mentioned earlier, identical assessments on imports of meats, fruits, and fiber, have invoked no court challenges, nor a single protest in the WTO. Opponents argued that it would be unfair to ask some products subject to tariff rate quotas to pay the assessment, even though many of our dairy imports, such as milk protein concentrates and certain cheese varieties, have no TRQs whatsoever.

The biggest fairness issue is whether asking importers to pay a rate half that of the domestic checkoff is equitable. It’s not, but that’s the decision that Congress arrived at: the choice in the most recent farm bill was between the proverbial half a loaf, or none at all. Such is the nature of politics, which is ultimately what decided the fate of this issue, after all the arguments, pro and con, were made.

In the end, this final resolution is not about equity, necessarily, but justice. And although justice in the matter of the dairy import assessment was long delayed, at least it has not been denied.