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NMPF Posts Strong Trade Policy Finish in 2018

January 15, 2019

Three federal filings by NMPF regarding trade deals in North America, the European Union and Asia highlighted U.S. dairy-farmer interests for the attention of government trade policy officials as 2018 ended. The first filing came Nov. 30, the same day the Trump Administration signed the U.S.-Mexico-Canada Agreement (USMCA), and the submissions continued until just before Christmas.

NMPF President and CEO Jim Mulhern said the work late last year will give American dairy farmers a stronger voice in key trade deals this year and beyond.

“We’re at a very important point right now for trade, with the prospect of an updated North American trade treaty at hand and new trade agreements about to launch with other major trading partners,” Mulhern said. “NMPF is ensuring that dairy farmers’ priorities are clearly communicated to our policy makers as they prepare to move forward on both fronts.”

U.S.-Japan Trade Agreement

NMPF’s Jaime Castaneda testified Dec. 10 at a U.S. International Trade Commission hearing on the proposed U.S.-Japan Trade Agreement, following the submission of NMPF’s written comments the previous week. Castaneda said America’s dairy farmers are pleased to see the United States moving forward with a deal with Japan – fourth among U.S. export markets, with exports valued at almost $300 million in 2017 – given the risk posed by standing still. But Castaneda cautioned that the U.S. must push strongly on Japan to provide greater dairy market access than the country’s leaders currently appear willing to offer.

“Our market share in Japan is at risk as our competitors will be receiving the benefits of the soon-to-be implemented Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Japan Economic Partnership Agreement (EU-Japan EPA),” said Castaneda. “We therefore urge the administration to swiftly begin negotiations and pursue ambitious results.”

Among NMPF’s recommendations:

  • Rejecting a pre-determined ceiling on the level of agriculture trade and instead determining the results of the agreement through negotiations;
  • Securing a better outcome than the CPTPP or the EU-Japan EPA for each tariff line to achieve larger TRQ volumes and a shorter tariff phase-out period;
  • Building upon the work done within the USMCA on topics of geographical indications and sanitary and phytosanitary commitments to safeguard access for U.S. exports to Japan.

U.S.-European Union Trade Agreement

NMPF focused on a possible U.S.-European Union Trade Agreement later in the month by teaming up with the U.S. Dairy Export Council (USDEC) to file recommendations with the Office of the U.S. Trade Representative (USTR) and testify at a USTR hearing on the potential agreement. NMPF pointedly emphasized that improved agricultural trade with Europe can only happen if the European Union (EU) is prepared to make major reforms to its protectionist and trade-distorting agricultural and regulatory policies.

“Anything less would pose a very high risk of simply exacerbating the present and deep agricultural trade imbalance that greatly benefits European farmers and companies at the expense of those in the United States,” said NMPF. “To date, the EU has shown no inclination to reform its ways. Instead, various actions over the past year have indicated a further entrenchment of EU protectionism via regulation.”

Among the priorities for EU trade that the dairy industry outlined:

  • Remove EU-imposed restrictions on common cheese names in the EU market and other U.S. export markets through the misuse of geographical indications (GIs), and require the EU be WTO-compliant in its GI system.
  • Fully recognize the safety of U.S. dairy products, eliminating problematic EU certificates pertaining to dairy, and assuring that future unscientific trade restrictions will not be imposed on U.S. dairy exports.
  • Eliminate dairy tariffs in a coordinated manner – EU tariff rates are triple those in the United States – if all nontariff concerns are fully addressed.

NMPF and USDEC also jointly wrote Ambassador Robert Lighthizer directly to underscore the high stakes for the dairy industry, given the $1.4 billion annual dairy trade deficit between the United States and European Union.

Focus on Mexico

In a submission to the United States International Trade Commission on Dec. 20, NMPF outlined the likely impact of the USMCA on the U.S. dairy industry, noting that work still remains to ensure American dairy farmers have fair access in North America and urging that the USMCA’s progress be used in future U.S. trade negotiations. This work includes:

  • Ensuring the reclassification of products after the end of Class 7 is done appropriately to genuinely reflect their end use, as called for by the agreement;
  • Enforcing export surcharges on skim milk powder, milk protein concentrate and infant formula as outlined in the USMCA and preventing the proceeds from being redistributed to the Canadian industry;
  • Lifting U.S. metal tariffs on Mexico in exchange for Mexico lifting its cheese tariffs;
  • Avoiding trade quota administration in Canada in a manner that discourages full market access granted to the U.S. under the agreement;
  • Making sure Canadian market access under the USMCA is provided in addition to the access Canada already agreed to; and
  • Benchmarking language in the USMCA that could be used in other trade negotiations in Japan, the United Kingdom and Vietnam.

Despite a challenging trade environment, dairy exports hit record highs in 2018, growing 4.5 percent from the year before. Still, tariff headwinds blunted the positive impact this should have otherwise had on returns to dairy farmers – moving exports out but having to cut margins to keep those sales means farmers don’t see good returns.