Why International Trade Matters to the U.S. Dairy Industry

For each of the past two years, U.S. dairy exports exceeded $1.5 billion. Unlike certain segments of U.S. agriculture, where exports account for a quarter or more of production, the U.S. dairy industry is still largely oriented to the domestic market. Less than 8.3% of milk production goes into dairy products that are exported. That volume accounts for only about 5% of all the dairy products traded internationally. So why does international trade matter to IDFA members?

The answer lies largely in our opportunities for growth. The U.S. dairy industry realizes that, as large as the U.S. market might be, our opportunities for growth really lie abroad.

Although the U.S. market is a sizeable one, 96% of the world's consumers are outside our borders. That's simply too large a customer base to ignore. Dairy trade is now increasingly driven by demands from developing-country consumers wanting to upgrade their diets and developed-country markets seeking specialty products.

Moreover, the U.S. market is a largely mature market, where consumption of many dairy products is slowing or stable (cheese is the one significant exception). Developing and newly industrialized economies offer stronger consumption growth rates for food products generally and dairy products in particular. Studies show that, as household income increases, the consumption of value-added food products, such as yogurt, cheese and ice cream, increases as well. Diets improve with increased consumption of highly nutritious foods such as milk and dairy products. This is true for many countries in Latin America, and it is an important reason for the export growth to the Mexican market. Focused marketing programs in Asian countries have also succeeded in introducing dairy products, such as cheese toppings, into the diets of nations where dairy foods have not traditionally figured prominently on the menu.

The U.S. dairy industry is also a relatively low-cost dairy producer. We manufacture high-quality, safe and nutritious products with some of the best technology and resources in the world. U.S. milk production keeps growing, even as the number of dairy farms and number of dairy cows decline, because of the productivity and efficiency of U.S. dairy farms and processing facilities. With the elimination of trade-distorting subsidies and other barriers to trade, more U.S. dairy products would be competitive in international markets.

Multilateral and regional trade agreements have also reduced certain dairy product tariffs and subsidy practices that hinder U.S. exports. As more market barriers fall, and the gap closes between U.S. dairy prices and world market prices, competitive opportunities for U.S. dairy foods expand and more U.S. firms make inroads into foreign markets.

A serious commitment by the U.S. government, with support from U.S. industry, is necessary to achieve enforceable trade agreements that eliminate tariff and non-tariff barriers to trade. These barriers include export and other trade-distorting subsidies, discriminatory or arbitrary technical standards and regulations, and other obstacles to free and open markets.

Posted February 2007