By Beth Hughes, Senior Director of International Affairs, IDFA
Last week IDFA submitted comments requested by Office of the U.S. Trade Representative (USTR) regarding foreign trade barriers. All submitted comments will be used by USTR to compile the National Trade Estimate Report on Foreign Trade Barriers. The report facilitates U.S. negotiations aimed at reducing or eliminating these barriers and is a valuable tool in enforcing U.S. trade laws and strengthening the rules-based trading system.
Trade is vital to U.S. dairy. After being a net importer of dairy products roughly a decade ago, the United States last year exported $5.6 billion in dairy products to over 140 countries around the world. In fact, approximately one day’s worth of U.S. milk production each week is exported.
In IDFA’s comments, we point out several trade barriers that directly impact the dairy industry. IDFA’s comments focus on what it considers the deepest and most hindering trade barriers with the following seven trading partners: Canada, China, European Union, India, Japan, Russia, and the United Kingdom. Below is a summary of the barriers outlined in our comments.
The U.S. faces many trade barriers with Canada that restrict market access for dairy products. The limited market access stems from the heavy involvement by the Canadian government in controlling milk prices, product marketing, and production of dairy prices, causing high prices for domestic dairy prices. To keep Canadians buying domestically produced dairy products, the Canadian government has a stringent quota system in place with severe out-of-quota tariff rates to restrict dairy imports.
China placed retaliatory tariffs on U.S. dairy products in response to the tariffs the U.S. placed on Chinese products due to the Section 301 investigation into Chinese intellectual property and technology transfer issues. These retaliatory tariffs are costing the U.S. dairy industry millions in sales, market share and jobs. China bought 33 percent of U.S. whey exports by value in 2018. Overall, U.S. whey shipments to China totaled to $174 million. From January to August 2019, with the retaliatory tariffs still in place, exports declined 45 percent year-over-year.
- European Union
Geographical indications (GIs) are a significant market challenge for the US dairy industry. GIs are an attempt by the EU to monopolize usage of certain cheese and other food names that the U.S. and many other countries regard as generic. Retaining the use of product names that have long been commonly used in the U.S. and around the world is a crucial issue for the U.S. dairy and processed foods industries, with generic cheeses being the primary target.
India uses trade-restrictive import procedures on milk and dairy products that effectively prohibit U.S. dairy from entering the country. Imported dairy products require a sanitary import permit issued by the Department of Animal Husbandry, Dairying, and Fisheries (DAHDF) and veterinary certification by an exporting country’s veterinary authority. Finally, India mandates that milk products must be derived from a dairy cow that has been fed a vegetarian diet for its entire life. These policies are scientifically unwarranted, inconsistent with international standards and overly burdensome on producers.
U.S. dairy exporters have lost significant market opportunities due to the implementation of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Japan economic partnership agreement. In April 2019, Japan held a second round of tariff cuts for all CPTPP members and the EU, giving the exporters in those countries access to the market by which the U.S. cannot compete. IDFA welcomes the first phase of a trade agreement with Japan. Tariff elimination is key to ensuring American producers and processors remain on a level playing field with our competitors.
In 2010, Russia effectively banned U.S. dairy products due to a new requirement of an approved list of foreign facilities. This new requirement maintains that all imported dairy products must come from Customs Union-approved facilities. As part of its WTO accession in 2012, Russia agreed to remove this requirement but has yet to do so and is now in direct violation of its WTO commitments. To complicate matters more, Russia banned the importation of U.S. agricultural products in 2014.
- United Kingdom
The U.S. dairy industry faces many barriers with the European Union including high tariffs and other non-tariff barriers such as burdensome import licensing and certification requirements. The UK has the potential to be a significant market for the U.S. dairy industry as it is a net importer of dairy products. However, IDFA is concerned that an independent United Kingdom will adopt many of the EU regulations that curtail U.S. dairy exports to the region. If that is the case, any benefit or gains made in market access will not be realized.