Over the past week, the IDFA team in Washington, D.C., has been working hard to gather intelligence and advocate on the most critical trade issues that are top of mind for IDFA members. Here is an update on IDFA’s work in four parts: China, a new “trade aid” package, the U.S.-Mexico-Canada Agreement (USMCA) and the EU Airbus / US Boeing case.
China
Trade tensions between the United States and China escalated last Friday as negotiations stalled.
What’s New
On Friday, the United States raised tariffs on Chinese imports, saying China had backtracked on its recently negotiated trade commitments. China responded by releasing a new list of retaliatory tariffs with an expected implementation date of June 1. The proposed Chinese tariffs combined with current tariffs would reach 37% for U.S. ice cream products, 30% for infant formula and 35% for casein, among others.
Analysis
Since the initial tariffs, sales of U.S. whey to China have dropped by 43%. For the first quarter of 2019, the value of U.S. cheese exports to China fell 43%, compounding the 42% loss U.S. cheese manufacturers experienced in the second half of 2018. In addition, African swine fever is decimating China’s large population of hog herd, therefore decreasing sales of U.S. whey, permeate and lactose exports for feed.
What to Expect
It is unclear when this trade dispute will reach a resolution. IDFA has continuously communicated to the administration that any trade deal with China must ensure full and equal access to the Chinese market, potentially a $23 billion market in the next 10 years. Access for the United States in any trade agreement with China must equal or best the provisions enjoyed by New Zealand and Australia.Read “As Trade Tensions Escalate, China Plans More Tariffs on Dairy” for more details.
‘Trade Aid’ Package
To alleviate the strain on American farmers and food companies, the administration is planning a second round of trade mitigation measures known as the “trade aid” package.
What’s New
The administration says it is working toward a $15 billion-$20 billion package. IDFA has communicated with the U.S. Department of Agriculture to ensure that any new support includes another round of dairy purchases. IDFA is also communicating with Feeding America to help sustain the Trade Mitigation Food Purchase and Distribution Program that last year completed a $135 million purchase of fluid milk for distribution at food banks across the country for the first time. Feeding America’s 200-member food banks have provided overwhelmingly positive feedback on the program.
What to Expect Next
We anticipate a trade mitigation package funded from USDA’s Commodity Credit Corporation (CCC) will be announced in the coming days, wherein dairy will be well represented.
USMCA Status
Thanks to strong advocacy by IDFA, USMCA meets the U.S. dairy industry’s top priorities, including preserving duty-free market access to Mexico, eliminating the Canadian Class 7 program and ensuring the fair trade of dairy.
What’s New
IDFA is inviting all IDFA members to sign a new letter to Congress that calls for ratification of the USMCA to demonstrate the unity of the dairy industry and U.S. food value chain. The deadline for signatures is May 28. Sign here.
Last July, Mexico imposed a 25% tariff on U.S. cheese exports in retaliation to Section 232 tariffs imposed on Mexican aluminum and steel imports by the United States. IDFA has continued to urge the administration to lift the Section 232 tariffs. This week, Senate Finance Chairman Chuck Grassley (R-Iowa) has suggested that U.S. and Canadian officials are nearing a deal to lift the tariffs.
Analysis
The environment for USMCA passage on Capitol Hill improved this week. The government of Mexico recently approved higher labor standards related to the deal, pleasing both U.S. House and Senate leaders. Meanwhile, the United States and Mexico are having deep discussions to lift the 232 and retaliatory tariffs.
What to Expect Next
These developments—especially lifting the 232 tariffs—bode well to give the Democratically controlled House and Republican-controlled Senate enough reason to call USMCA for a vote, which would allow the administration to send its draft statement of administrative action to Congress with the final text of the agreement. Congress then has 30 days to pass the deal. IDFA expects these immediate next steps could happen as the next few weeks.
Read “Members: Support USMCA by Signing Joint Letter to Congress” for more details.
EU Airbus / US Boeing Case
The U.S. Trade Representative (USTR) announced that it will soon impose retaliatory tariffs of $11.2 billion against the European Union (EU) due to EU Airbus subsides against the U.S. The EU is awaiting a final decision from the World Trade Organization on damages related to U.S. subsidies to Boeing, which could lead to a new series retaliatory tariffs between the two markets.
What’s New
USTR is in the process of identifying products of the EU, including agricultural products and other goods from all 28 EU member-states, to which additional duties may be applied until the EU removes those subsidies. Of interest to IDFA members, several dairy products, including yogurt, butter, cheese and chocolate milk drink, are cited.
What to Expect Next
USTR is holding hearings this week and has asked for public comments by May 28. IDFA plans to comment on the need for a market-principled approach as current tariff escalation is causing uncertainty in the market. IDFA is collecting member input through Wednesday, May 22.
Contact Beth Hughes, IDFA senior director of international affairs, at bhughes@idfa.org for more information.