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Perspective:
Industry Issues

NAFTA addresses North America, but we need global growth

Michael Dykes

Michael Dykes is president and CEO of the International Dairy Foods Association. He contributes this column exclusively for Cheese Market News®.

The launch last week of trilateral efforts by the United States, Canada and Mexico to renegotiate and modernize the North American Free Trade Agreement (NAFTA) was a welcome first step in what we hope will be an ambitious trade agenda for the United States going forward.

Although not all dairy companies are currently active in global markets, the U.S. dairy industry has huge, and in many cases untapped, potential for growth in international sales. At IDFA, we recognize the vast opportunities that exist with the right trade policies and pacts in place, and we’ve recently ramped up efforts to urge the administration to consider crafting a series of bilateral trade pacts before long.

• We’re positioned for growth

The United States is now the single largest cow’s milk producer in the world with farm milk production growing from 170 billion pounds in 2003 to 212 billion pounds in 2016. U.S. companies currently export about 15 percent of that production to other countries, and these exports contribute about $1.25 per hundredweight to the price of milk.

USDA projects that U.S. milk production will grow by 23 percent, about 48 billion pounds, over the next 10 years. That’s a lot of milk, and we don’t realistically expect domestic consumption to absorb that increase in production.

Fortunately, the demand for dairy continues to develop among an increasing world population and more consumers with greater disposable income and a desire for higher-protein products like dairy. That’s why it’s incumbent on IDFA and the dairy industry to look beyond our borders and those of our North American neighbors for future sustained growth.

Don’t get me wrong; NAFTA is extremely important to U.S. dairy, and we’re encouraged to see that several key priorities for the U.S. dairy industry are reflected in the administration’s objectives for the renegotiation efforts. As they continue in September and beyond, we look forward to working with Ambassador Robert Lighthizer and others in the administration to preserve the critically important dairy export market in Mexico, to address our concerns with Canada’s protectionist pricing policies and to improve our market access in Canada.

• We can’t afford to wait

But a modernized NAFTA represents only one spoke on the wheel of trade agreements that are necessary for a healthy U.S. dairy industry. The United States must simultaneously forge new trade agreements, starting with the emerging economies of the Asia-Pacific region, where dairy consumption is rising rapidly. Gaining access to new markets now is critical for U.S. agriculture. We cannot afford to wait until after the NAFTA negotiations are complete because, by that time, we may already be too far behind in key markets.

Other dairy exporting countries are aggressively gaining access to some of the most lucrative dairy markets around the world. The completion in July of the European Union-Japan Free Trade Agreement is the latest example of the United States falling behind with an important trading partner.

The EU is one of our primary competitors in dairy, and it uses free trade agreements to gain preferential access to new markets as well as to prevent other countries from entering those markets in the future by creating overly broad protection for geographical indications (GIs). The 200-plus GI provisions in the EU-Japan FTA look ominous for U.S. dairy; in fact, they may foreclose the opportunity for the United States to sell certain cheeses to Japan.

And that’s just one example. The EU also has completed trade agreement negotiations with Vietnam, and it is actively negotiating agreements with India, Indonesia and Malaysia. At the same time, it’s updating a current free trade agreement with Mexico, our largest dairy export market.

Other key dairy exporters also are expanding their global reach. Australia is negotiating bilateral agreements with India and Indonesia and, along with New Zealand, is engaged in the Chinese-led multilateral Regional Comprehensive Economic Partnership (RCEP) agreement.

We know U.S. dairy products can be competitive in any market around the globe, provided they have access to the same tariff rates and rules as our competition. When other countries receive tariff advantages or duty-free quotas through free trade agreements, however, U.S. dairy products become much less attractive in those countries. As more global consumers add dairy to their diets, we need to ensure that our products have a competitive spot on their grocery store shelves.

Since the start of the Trump administration, IDFA has consistently pushed for policies and pacts that will preserve and grow dairy exports. In the months ahead, we’ll continue to work with members of the administration and Congress to make sure dairy’s concerns are heard and addressed, and I encourage all dairy stakeholders to do the same.

Renegotiating NAFTA is a great start, but we need an ambitious U.S. trade agenda to provide similar success stories for dairy in the future.

CMN

The views expressed by CMN’s guest columnists are their own opinions and do not necessarily reflect those of Cheese Market News®.

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