Trade News is a periodic update that provides a concise compilation of current trade happenings and their impact on the dairy industry by Beth Hughes, IDFA senior director of international affairs.
IDFA continues to advocate for greater market access for U.S. dairy companies abroad. IDFA is tracking actions on trade that are positive for dairy, including the likely signing of the U.S.-Mexico-Canada agreement (USMCA) later this month; the tariff situation with China; new bilateral talks with strong markets for U.S. dairy; and a second round of trade mitigation package payments and purchases by the U.S. Department of Agriculture.
US-Mexico-Canada Agreement
The United States-Mexico-Canada (USMCA) agreement addressed our priorities, which included preserving our top export market with Mexico, eliminating Canada’s Class 7 pricing system and allowing additional market access into the Canadian market. We expect all three countries to sign the agreement on or before Nov. 30. A U.S. congressional vote is possible in the lame-duck session of this Congress, but it is most likely in March or April after a number of procedural requirements are met, including the publication of an economic impact report by the International Trade Commission (ITC).
As part of the economic impact report, the ITC is holding a hearing on Nov. 15 regarding the likely impact of the USMCA on the U.S. economy. Michael Dykes, D.V.M., IDFA president and CEO has requested to appear as a witness on behalf of the U.S. dairy industry. IDFA will also provide written comments to the ITC due in December.
The Section 232 aluminum and steel tariffs remain in effect on imports from Mexico and Canada and continue to disrupt our U.S. dairy market. The administration is in negotiations with Mexico attempting to reach agreement to lift these tariffs before the USMCA is signed next month. Like other U.S. trading partners, Mexico and Canada may have to agree to import quotas to get the 232 tariffs removed.
China Tariffs
Due to China’s intellectual property policies and practices, the United States has imposed Section 301 tariffs on over $250 billion of Chinese goods. China’s latest retaliation in September included tariffs on essentially all U.S. dairy products. President Trump and China’s President Xi have agreed to meet at the G-20 Summit in Buenos Aires, Argentina, at the end of November. If a deal isn’t struck between the two leaders, the U.S. has threatened to impose an additional $257 billion worth in tariffs in December on all the remaining products imported from China.
China was the third largest export market for the U.S. dairy industry last year. In 2017, U.S. dairy exports totaled $538 million compared to only $154 million ten years prior. Unfortunately, the retaliatory tariffs are derailing those efforts and costing the U.S. dairy industry millions in sales, market share and jobs.
China bought 38 percent of U.S. whey exports by value in 2017. However, in July and August 2018, the first months with the retaliatory tariffs in place, exports declined 28 percent year-over-year. Likewise, China has been becoming a major market for cheese, with its total imports up by an annual average of 20 percent over the past five years. Similar to the case of U.S. whey exports, U.S. cheese exports declined 46 percent in July and August 2018 year-over-year.
US-Japan FTA
The U.S. Trade Representative posted a notice in the Federal Register last week requesting comments on a proposed U.S.-Japan trade agreement. The deadline for submission is November 26 and a public hearing will be held on Dec. 10. We will be requesting information from IDFA’s international trade committee on current trade barriers like tariffs and quota administration to formulate our negotiating objectives to ensure that IDFA trade priorities are addressed in these negotiations.
The Philippines
Progress was made on several fronts last week to negotiate a bilateral trade agreement with the Philippines. Under the bilateral Trade and Investment Framework Agreement (TIFA), Ambassador Lighthizer and his Philippine counterpart discussed many issues including an extension of current tariff rates on agricultural products. Progress was also made to ensure greater transparency and due process for geographical indications “including by respecting prior trademark rights and not restricting the use of common names.”
The Philippines has the potential to be an excellent market for U.S. dairy exports. The United States. is currently the second largest supplier of dairy products to the Philippines but faces stiff competition from New Zealand and Australia which have duty-free access into the Philippine market.
USDA Trade Aid Mitigation Package
Agriculture Secretary Sonny Perdue announced Monday that the Trump administration will initiate a second round of trade aid mitigation package payments and purchases in December. This is in addition to the initial payments to agricultural producers, including dairy farmers, and the $84.9 million allocated to purchase fresh fluid milk and cheese in January and April 2019, for distribution to food banks and through other food distribution programs.
Contact Hughes at bhughes@idfa.org.