Chris Galen, senior vice president of membership services and strategic initiatives, discusses the latest updates in trade policy and how recent developments affect the U.S. dairy industry.

ARLINGTON, VA. – NMPF is pleased that the Environmental Protection Agency (EPA) and the Department of the Army Corp of Engineers have released a new final Waters of the United States (WOTUS) rule. Today’s action puts an end to years of contentious rulemaking and will provide a common-sense approach to regulating waters of the U.S.

On Oct. 22, 2019, the EPA and the Department of the Army published a final rule to repeal the 2015 Clean Water Rule: Definition of “Waters of the United States” to restore regulatory text that existed prior to the 2015 Rule. That final rule became effective Dec. 23.

In the interim between repealing the 2015 Rule and introducing a new one, the agencies implemented pre-2015 Rule regulations, as informed by applicable agency guidance documents and consistent with Supreme Court decisions and longstanding agency practice. This action was a temporary fix as the agencies continued their work in crafting the WOTUS replacement issued today.

NMPF has engaged with EPA on this issue for years, in meetings and in numerous written comments, seeking improvements to the 1986 WOTUS rule, which lacked clarity for farmers. While NMPF will need to carefully review today’s new rule, we were pleased with the proposed rule and believe it will provide much-needed clarity and not infringe on the rights and responsibilities of state jurisdictions.

ARLINGTON, VA –Today’s signing of the Phase One trade agreement with China makes important advances on nontariff issues harming U.S. dairy trade. While promises of additional Chinese purchases of U.S. agricultural products in the next two years are encouraging, the benefits for the dairy industry remain unclear. Given that China’s retaliatory tariffs remain a significant impediment to U.S. dairy sales in China, the U.S. Dairy Export Council (USDEC) and National Milk Producers Federation (NMPF) stress that work with China is not complete until the retaliatory tariffs against all U.S. dairy exports are fully lifted.

“Today’s announcement of a deal that makes progress on regulatory restrictions and other nontariff barriers hindering dairy trade is a positive step forward. These are important deliverables that USDEC has been pressing China for over the course of the last few years,” said Tom Vilsack, president and CEO of USDEC. “We need to continue to work with our government, China’s government and our customers to finish the job by lifting the remaining Chinese retaliatory tariffs against our exports.”

“America’s dairy farmers have been disproportionally harmed by China’s retaliatory tariffs, and we cannot ask our farmers to continue operating under this financial uncertainty,” said Randy Mooney, dairy farmer from Rogersville, MO and Chairman of NMPF, who joined President Trump and administration officials at the White House signing ceremony on Wednesday. “We appreciate the hard work invested by both the U.S. and Chinese governments, but we urge China to swiftly lift all retaliatory tariffs against U.S. dairy products and work with U.S. suppliers to fulfill their purchasing commitment.”

The Phase One deal with China makes progress on nontariff barriers important to U.S. dairy, such as:

• Tackling facility and product registration steps that have stymied firms seeking to export to China for several years;
• Improving the regulatory pathway for exports of infant formula and fluid milk (including extended shelf life milk) to China;
• Creating new transparency and due process obligations regarding geographical indications and common food names; and
• Promises of increased purchases of U.S. agricultural goods, including dairy.

Left to be fully resolved is how China will fulfill its commitment to purchase large quantities of U.S. agriculture products, including dairy.

China remains a valuable export market for U.S. dairy products, despite retaliatory tariffs. Over the 12-month period spanning December 2018 – November 2019, U.S. dairy exports to China totaled $377 million in sales. However, retaliatory tariffs on U.S. dairy products have steeply disadvantaged the U.S. industry compared to its competitors and contributed to 47 percent decline in U.S. exports to China over that same period, harming U.S. farmers, manufacturers and exporters.

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Election years always pose challenges for getting things done on Capitol Hill, but dairy is well-positioned to make gains in 2020, according to Paul Bleiberg, the National Milk Producer Federation’s vice president of government relations.

Senate approval of the USMCA trade agreement and a Senate plan on agricultural labor are only two topics in which positive steps could occur, said Bleiberg, NMPF’s chief policy staffer for the past two years. Child nutrition, transportation could also get put on the front burner, depending on what Congress decides to take up this year. “The completion of the USMCA process and the work in the Senate on ag labor are the top two priorities,” Bleiberg said.

Bleiberg also discusses dairy’s role in the 2020 elections and how dairy producers and allies can affect policy. To listen to the full podcast, click here. You can also find the Dairy Defined podcast on Apple Podcasts, Spotify,  SoundCloud and Google Play. Broadcast outlets may use the MP3 file below. Please attribute information to NMPF.

(Note: NMPF’s Dairy Defined podcast explores today’s dairy farms and industry using high-quality data and podcast-style interviews to explain current dairy issues and dispel myths.)

December’s CWT-assisted sales of 4.1 million pounds of cheese, butter, whole milk powder and cream cheese raised the 2019 export sales to 48.9 million pounds of America-type cheeses, 5 million pounds of butter, 46.1 million pounds of whole milk powder, and 6.8 million pounds of cream cheese. The milk equivalent of these 2019 CWT-assisted sales is 956.3 billion pounds on a milkfat basis.

These sales mean an estimated 135 million pounds of CWT-assisted dairy products have been shipped out of the U.S. and into overseas markets in 2019, the milkfat equivalent of 1.257 billion pounds of milk.

In December, CWT assisted six member cooperatives in securing 42 sales contracts for 2.1 million pounds of American-type cheeses, 332,898 pounds of butter, 1 million pounds of whole milk powder, and 634,931 pounds of cream cheese. The products will be shipped during the months of December 2018 through April 2019.

Assisting CWT member cooperatives gain and maintain world market share through the Export Assistance program positively impacts all U.S. dairy farmers by strengthening and maintaining the value of dairy products that directly impact their milk price. It does this by expanding the demand for U.S. dairy products beyond the domestic market thereby increasing the total demand for U.S. farm milk.

The amounts of dairy products and related milk volumes reflect current contracts for delivery, not completed export volumes. CWT will pay export assistance to the bidders only when export and delivery of the product is verified by the submission of the required documentation.

All cooperatives and all dairy farmers benefit from CWT’s activities and should add their support to this important program in 2019 and beyond. Membership forms for 2019-2021 are available at http://www.cwt.coop/membership.

Last month the U.S. and China struck a Phase One trade deal that covers a wide range of issues, including many relevant to U.S. agriculture. At the time of this newsletter’s publication, details of the deal remain under wraps and available only on a strictly confidential basis to trade advisors. NMPF’s staff that serve in that capacity are therefore prohibited from sharing information on the agreement until the U.S. government releases it more widely.

The agreement includes results on important areas NMPF, working side by side with USDEC, has championed the need for progress on such as geographical indications, resolution of non-tariff barriers to U.S. dairy exports, and additional purchases of U.S. agricultural products.

A major determinant of the positive impact of this agreement will be the extent to which it includes or is linked to a roll-back of the punitive retaliatory tariffs imposed on our dairy products by China. This element is one NMPF has consistently pointed out is the linchpin to restoring inroads to the Chinese market.

NMPF hosted the National Conference on Interstate Milk Shipments (NCIMS) Liaison Committee November 19 and 20 for a two-day discussion on how Grade “A” (GA) milk plants will be inspected under the Pasteurized Milk Ordinance (PMO) and the Food Safety Modernization Act (FSMA).

The Food and Drug Administration (FDA) and the Liaison Committee have been discussing the matter for several years without much success, but progress is finally being made. The long-term goal is to have a single inspection that will cover all products made at the facility, GA and Non-Grade “A” (NGA).  In 2018, FDA tried back-to-back inspections, first a PMO inspection, followed by an FSMA inspection. Plant personnel described that as an overwhelming experience and NMPF urged the FDA not to conduct inspections that way in the future.

The current concept is for the Office of State Cooperative Programs, Division of Milk Safety (DMS) Milk Specialists to be responsible for inspectional coverage and regulatory compliance of all food products manufactured at NCIMS-listed dairy processing facilities, with some exceptions. Those exceptions include infant formula, low acid canned food and seafood. Milk Specialists will expand their Preventive Controls for Human Foods (PCHF) review for compliance to all food products, GA and NGA products manufactured at GA plants. They will also use guidance provided by the Office for Food Safety (OFS) for decision making.

The Milk Specialist’s check rating and inspection may count as the Title 21 CFR Part 117 Current Good Manufacturing Practice, Hazard Analysis, and Risk-Based Preventive Controls for Human Food inspection (limited scope Preventive Control (PC) inspection), provided that the firm had an adequate food safety plan that includes environmental testing and monitoring, and was verified by the Milk Specialist during the PC inspection.

FDA’s Milk Specialists, as part of the Check-Rating (CR) every three years, must verify that the firm has adopted comprehensive controls for both GA and NGA products as part of a food safety plan, and that the state had been doing comprehensive inspections to address preventive controls for all dairy products. If these criteria are not met, the FDA Milk Specialist, or state under contract, will conduct a traditional PC inspection for the NGA products. In most cases, one FDA Milk Specialist staff performs the inspection and check rating for all listed manufacturing facilities.

The FDA, in collaboration with state liaisons, will pilot this approach this year.

NMPF signed on to comments with the Agriculture Nutrient Policy Coalition and wrote a letter of support for Newtrient’s comments, which were submitted to the water quality trading docket December 18. The comments detailed support for Water Quality Trading as an important tool for water quality improvement in the United States.

NMPF has a long history of supporting water-quality trading, serving on the steering committee of the National Network on Water Quality Trading that published “Building a Water Quality Trading Program: Options and Considerations” and “Breaking Down Barriers: Priority Actions for Advancing Water Quality Trading.” NMPF has also been involved with Maryland’s effort to launch a water quality trading program and Pennsylvania’s water-quality procurement legislation.

In November, Clay Detlefsen, NMPF’s senior vice president for regulatory affairs, provided oral comments stating its strong support for the Environmental Protection Agency’s (EPA) efforts to promote water quality improvements at a lower cost than traditional regulatory approaches, agreeing with EPA that the Clean Water Act allows for pollutant reductions from water quality trading to achieve compliance with regulatory requirements.

Detlefsen also said NMPF appreciated EPA‘s efforts this year to update its water quality trading policy to  encourage technologies and practices that reduce nonpoint source pollution.  NMPF also concurred with the six principles laid out in the 2019 Memorandum, namely:

• States, tribes and stakeholders should consider implementing water quality trading and other market-based programs on a watershed scale.
• EPA encourages the use of adaptive strategies for implementing market-based programs;
• Water quality credits and offsets may be banked for future use;
• A single project may generate credits for multiple markets;
• Financing opportunities exist to assist with deployment of nonpoint land use practices; and
• Encouraging simplicity and flexibility in implementing baseline concepts

In a guest column featured in Cheese Reporter, NMPF president and CEO Jim Mulhern offered an alternative approach to comments by the Cheese Importers Association of America (CIAA) regarding the WTO-authorized tariffs on European cheeses.

Mulhern noted that current dairy trade between the U.S. and the EU is mostly a one-way street. The EU’s restrictive trade policies have resulted in a deeply unbalanced, $1.6 billion dairy trade deficit, with the United States importing about $1.74 billion worth of dairy products from the EU, while the EU imported only $144 million in U.S. dairy in 2018.

That imbalance, in addition to the EU’s flooding of the global dairy market last year with government-held stocks of milk powder, has crucially contributed to the economic pressures that have driven thousands of American dairy farmers out of business.

Mulhern pointed out that cheese importers have access to some of the best cheese in the world in the U.S. and encouraged them to embrace this opportunity to support America’s dairy farmers and manufacturers by choosing to sell high-quality American products in place of European ones.

Many European cheeses and butter will still be imported if the WTO-compliant tariff penalties stay levied at their present 25% rate; higher tariffs are necessary for the United States to take the strongest stand possible against the EU’s mistreatment of American dairy products. NMPF is encouraging the administration to keep the existing dairy products on the retaliation list and increase tariffs on European dairy products, particularly those the United States is barred from shipping to the EU by geographical indications monopolies on common food names, in order to elicit action from the EU and truly establish a level playing field for U.S. farmers.

NMPF filed comments to FDA’s draft guidance, “Recommendations for Sponsors of Medically Important Antimicrobial Drugs Approved for Use in Animals to Voluntarily Bring Under Veterinary Oversight All Products That Continue to be Available Over-the-Counter” on December 24, emphasizing the dairy industry’s commitment to prudent and responsible antibiotic use and general support for the guidance.

NMPF has recognized that the availability of over-the-counter (OTC) antimicrobials has decreased over the years and has made the Veterinarian Client Patient Relationship a cornerstone of the FARM Animal Care Program.

FDA’s intent with GFI #263 is for animal drug pharmaceutical manufacturers to voluntarily change the marketing status of the remaining approved animal drugs containing antimicrobials of human medical importance from OTC to prescription (Rx) under the oversight of licensed veterinarians. This draft guidance comes as part of FDA’s five-year plan for supporting antimicrobial stewardship in veterinary settings as part of a strategy to address antimicrobial resistance associated with the use of antimicrobial drugs in animal agriculture.

GFI #213 was FDA’s first step to increase oversight of antimicrobial use through voluntary industry action to change marketing status of medically important antimicrobials used in feed or drinking water for food-producing animals from OTC to VFD/Rx. This also resulted in the elimination of the use of these antimicrobials for production practices. While GFI #263 will be voluntary, NMPF anticipates that pharmaceutical manufacturers will change the marketing status of the limited number of dosage forms of medically important antimicrobials still available from OTC to Rx for both food-producing and companion animals.

NMPF recognizes that there may be geographic and farm size challenges for some dairy farmers to have access to large-animal veterinarians. These concerns were outlined in our comments.