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Seeking Balance

September 8, 2015


There’s been a steady decline in the number of farms across the developed world over the decades, but because of the national security, economic and political importance of rural communities, the clout of farmers remains a potent force.  The proof of this assertion was on display recently at the trade bargaining table in Hawaii, where government representatives from 12 countries spanning the Pacific Ocean tried in July to wrap up negotiations on the Trans-Pacific Partnership.  There were, and still are, several sticking points to resolve in the TPP, but none is as important as agricultural trade, and especially trade in dairy products.

The most recent round of TPP talks ended July 31st with a deadlock because dairy farmers in Canada – and to a lesser extent, Japan – don’t want to see new competition from U.S. producers. While these two major countries seek to maintain limited access to their markets, our own industry is focused on growing its presence in the world. Part of this focus is driven by necessity. We produce a lot more milk than our domestic market needs. If we don’t continue to increase our exports, we’ll be drowning in a sea of excess milk that will further erode producer prices.

Another part of this focus is driven by demographics and the recognition that the future major growth opportunities lie outside our borders. The domestic market is critically important to our industry, and America’s consumers will always be our bedrock. But incremental growth in the U.S. will not be enough to absorb our farmers’ incredibly productive output. The rapid growth in Asia’s population presents a great potential opportunity for our industry, and TPP, if done right, will be critically important in terms of establishing the foundation and framework for that growth opportunity.

As we push Canada and Japan to be more ambitious in their approach on dairy in TPP, we recognize that New Zealand, a powerhouse in world dairy trade, will get some additional access to our market – that much was clear from day one of these negotiations. But we have insisted that any agreement must provide clear benefits for our industry, and at minimum, achieve a balanced market access outcome. We must obtain at least as much new access in Canada and Japan as is granted in new access to our market. The U.S. cannot be the dumping ground – the market of last resort – to mop up the excess when world markets are overburdened.

Until we can achieve an agreement that can be supported by dairy, the entire TPP agreement remains in a stalemate.

It’s important to recognize that trade deals almost never achieve completely free trade between nations. They are more about managing the terms of how countries allow some additional access to their markets from other nations while seeking to win new markets for their exports.  And sometimes trade agreements will trade off the needs and goals of one part of a country’s economy for another.  In the past, American agriculture has unfortunately been a sacrificial offering in order to win concessions for other sectors such as manufactured goods, pharmaceuticals or software.  It’s a high-stakes balancing act.

That’s why NMPF and the U.S. Dairy Export Council have been adamant that the Trans-Pacific Partnership must not result in a one-way increase in net dairy imports into the U.S.  Japan and Canada are major, mature consumer markets. And while our products have a toehold in those countries, they still have significant restrictions that protect their domestic dairy markets.  The TPP is not going to completely wipe away those barriers, but they need to be significantly reduced in order to generate an agreement that provides opportunity for America’s dairy farmers. 

As the talks drag on into the fall, and the pressure mounts on Canada and Japan, the good news is that members of the Senate and House are watching, and advocating the need to achieve a positive deal for dairy.  Earlier this summer, key leaders in trade and agricultural policy – in both the Senate and House, in both political parties – reminded U.S. trade negotiators of how important dairy trade is to the final TPP equation.  These communications delivered a powerful and unequivocal signal to the highest levels of the U.S. government that, unless this agreement can deliver a deal that dairy can support, the chances of the TPP getting approved on Capitol Hill are at risk.  The political support for U.S. dairy farmers was clear in the support for our key messages about what an acceptable TPP dairy result looks like.

In addition to more market access to other countries in the TPP region, the U.S. dairy sector is pushing hard to improve the sanitary and phytosanitary regulations that govern dairy commerce so that our exports don’t unfairly get excluded because of bogus quality or safety concerns.  The fact is that our milk quality is beyond dispute.  Unfortunately, we need trade agreements to drive home the point that artificial trade barriers, based on illusory excuses about dairy quality, need to be eliminated.

Another promising advancement in the TPP negotiations has been the issue of geographical indications, which, if used inappropriately, can limit common food names in export markets to those products from a specific region or country. Among those potentially hurt by an expansion of geographical indications are U.S. dairy producers and processors that have relied for decades on well-established cheese names like parmesan and feta. TPP trade ministers appear to have tentatively agreed to language which would foster improved protections for common food names and push back against aggressive European efforts to block out our products.

So the talks will continue, informally for now, and perhaps more formally later this fall, on several important TPP issues.  The stakes for America’s dairy farmers are high, and so is NMPF’s engagement. At the end of the day we want a fair deal or no deal at all.