Free Trade Agreements

IDFA believes that bilateral and multilateral trade agreements are very important in promoting trade growth in dairy products. Though free trade agreements (FTAs) are not a proficient instrument to address domestic trade support or export subsidies in dairy, they are devices to eliminate tariffs and other barriers to market access in specific markets. In the last few years, world market prices for dairy products were elevated, making U.S. dairy exports more competitive.

Colombia
The U.S.-Colombia Free Trade Agreement was signed in November 2006. U.S. dairy exports to Colombia in 2006 were valued at approximately $6 million. Congressional approval of the Colombia FTA is expected to be difficult because U.S. labor unions and sugar producers are likely to oppose the agreement.

Malaysia
Free trade talks began with Malaysia in June 2006 and have proceeded slowly. The Malaysians have announced that they do not have a timetable for concluding the negotiations. In 2006, U.S. dairy exports to Malaysia were valued at $48 million. Tariffs on U.S. dairy exports are relatively low compared to other Asian markets.

Panama
The free trade negotiations with Panama concluded in December 2006. However, the labor provisions are subject to further discussions, and Congressional approval is still pending.

Peru
The United States and Peru signed a free trade agreement in April 2006, and the Peruvian government has approved the deal. With a vote of 77-18, the U.S. Senate passed the FTA on December 4, setting the stage for President Bush to sign the agreement into law by the end of the year. The House of Representatives passed the legislation in November by a vote of 285-132. IDFA supports the agreement because it will open new opportunities and allow the thriving market with Peru, which totaled approximately $12 million in dairy exports last year, to flourish. Upon implementation, U.S. dairy exporters will gain immediate duty-free, quota-free access for whey and lactose exports as well as sizeable amounts of tariff-free access for cheese, ice cream and processed dairy products.

South Korea
In April 2007, the Administration completed the U.S.-Korea Free Trade Agreement. The Republic of Korea represents the seventh largest market for U.S. dairy imports, which reached $65 million last year, an increase of 11% over 2005. U.S. dairy exports to Korea have doubled in the past six years despite the existing tariff rate quotas and tariffs of 20% or more. The FTA deal has to be approved by the two country's congress respectively before going into effect. In the U.S., democrats have criticized the agreement for the lack of new access for exports of American rice and for its failure to resolve certain import barriers on American automobiles.

Thailand
The United States and Thailand began free trade discussions in 2004, but negotiations have progressed very slowly. In 2006, a military coup in Thailand led to a postponement of negotiations and, although talks have not been officially terminated, there are no negotiating sessions planned for 2007. In 2006, U.S. dairy exports to Thailand were valued at $35 million.

Morocco — 2006
The Morocco free trade agreement took effect in 2006. It granted automatic duty-free access for whey. For the majority of dairy products, tariffs are to be phased out over the next 15 years. U.S. dairy exports to Morocco have dramatically increased. In 2005, they were valued at $4 million.

Australia — 2005
The U.S.-Australia Free Trade Agreement was approved by Congress in 2004 and took effect in January 2005. The FTA maintains U.S. over-quota tariffs, although it does permit for some additional in-quota access for Australian dairy products.

CAFTA — DR — 2005
Congress approved the Central America Free Trade Agreement (CAFTA) with Central America and the Dominican Republic (DR) in the summer of 2005. Except for Costa Rica, all affiliated nations approved the FTA. Thus far, CAFTA-DR has been implemented with El Salvador, Guatemala, Honduras and Nicaragua. For 2006, U.S. dairy exports to those countries are expected to be valued at approximately $31 million. Currently, the U.S. Trade Representative's Office is engaged in discussions with the Dominican Republic to guarantee that it is in compliance with the agreement.

Chile — 2004
The free trade agreement with Chile went into effect in 2004. Tariffs on U.S. dairy product exports to Chile will be phased out over four years. In 2005, U.S. dairy exports to Chile were valued at $6.7 million.

Singapore — 2004
Congress endorsed the free trade agreement with Singapore in 2003, and it went into effect in 2004. Singapore did not apply any tariffs on dairy. The FTA made zero duties on dairy permanent. In 2005, U.S. dairy exports to Singapore were valued at $22 million.

Jordan — 2001
The free trade agreement between the United States and Jordan went into effect in December 2001. The agreement eliminated tariffs on the majority of dairy products including cheeses, butter, some powders and lactose. The tariff phase out is still in process on several products, including whey, some milk powders, some food preparations, ice cream and most yogurts. U.S. dairy exports to Jordan have been minimal.

NAFTA — 1994
The North American Free Trade Agreement (NAFTA) took effect in 1994. The agreement with Canada preserves the tariff-rate quotas on U.S. dairy exports. However, dairy tariffs on U.S. exports to Mexico have been abolished gradually. The sole Mexican dairy tariff that remains in place on U.S. dairy products is for skim milk powder. This final tariff will be eliminated in January 2008, when final portions of the agreement reach fulfillment. Mexico and Canada represent our number one and two largest dairy exports markets, respectively.

Israel — 1985
The free trade agreement with Israel took effect in September 1985 and is completely phased in, although it does not abolish all tariffs on all dairy products. In 2005, U.S. dairy exports to Israel were valued at $7 million.