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Guest Columns

Perspective:
Industry Issues

Urgent: Trade pacts needed now

Michael Dykes, D.V.M.

Michael Dykes, D.V.M., president and CEO of the International Dairy Foods Association, contributes this column bimonthly for Cheese Market News®.

The U.S. International Trade Commission (ITC) last week released its assessment of the likely impact the U.S.-Mexico-Canada Agreement (USMCA) will have on the U.S. economy and industry sectors, including food and agriculture. Before I delve into the dollars and details, let me share the good news: We know the USMCA will provide a big win for the U.S. dairy industry, and I’m pleased to say that the ITC report confirmed that fact.

According to ITC, the USMCA would raise the U.S. GDP by $68.2 billion, pumping an additional $2.2 billion, or 1.1 percent, into the U.S. economy through increases in agricultural and food exports. For dairy, the ITC expects U.S. exports would increase by more than $277 million overall, with an additional $227 million of American dairy products going to Canada and $50.6 million more to Mexico.

Those numbers become even more impressive when we explain that 20,000 American jobs are created for every $1 billion of dairy products that cross our borders and leave our ports.

Many lawmakers have said they wouldn’t make up their minds on how they would vote on the USMCA until they read the independent agency’s report. The results are conclusive that USMCA will bolster U.S. food and agriculture exports. In fact, the USMCA is a boon for many U.S. industries. So, with this good news in hand, we’ve stepped up our advocacy efforts, calling for swift passage of the USMCA by Congress.

At the same time, we’re encouraging the Trump administration to maintain a swift pace on all trade issues because the stakes are so high for U.S. dairy. We’re communicating a heightened level of urgency with emphasis on outstanding talks with China, Japan, the European Union (EU) and other priority markets.
The reasons for our urgency are simple:

• Mexico imposed a 20-25 percent retaliatory tariff on U.S. cheese last year, which has had a negative impact on our industry.

• The EU’s incessant barriers to imports of U.S. dairy products have led to an outsized trade deficit between our countries.

• Last year, the United States lost 40 percent of its cheese and whey exports to China, compared with 2017 sales, due to retaliatory tariffs.

• In Japan, our fifth largest market for dairy, U.S. dairy exports face exceedingly high tariffs and other barriers to trade.

Fortunately, the ITC report wasn’t the only positive trade news coming out of Washington last week.

Ambassador Robert Lighthizer, the U.S. Trade Representative, met with Japanese Economy Minister Toshimitsu Motegi to discuss a framework for a possible trade agreement between the two countries. The USTR’s negotiating objectives, which were outlined by the administration in December, covered several of IDFA’s priorities, including increasing access to the Japanese market, reducing or eliminating tariffs on U.S. agricultural products and addressing technical barriers to trade.

• Level playing field in Japan

In 2018, Japan accounted for more than $270 million of U.S. dairy exports. It also became one of the six countries to implement in December the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a modified version of the Trans-Pacific Partnership that emerged after the United States withdrew in January of 2017. The CPTPP, which excludes the United States, changed the landscape for U.S. dairy products abroad by giving the pact’s partners preferential market access to the Asia-Pacific region.

That pact will make it difficult to keep Japan as one of our largest markets without a free trade agreement of our own. Just this week, IDFA spearheaded a letter from 89 associations and companies to Ambassador Lighthizer outlining how recent Japanese tariff cuts on agricultural imports from the EU and CPTPP member countries are causing U.S. industries, including dairy, to lose lucrative sales to these competitors.

IDFA will continue to stress that negotiations with Japan ensure a level playing field for American dairy companies.

• Gain access in China

China was the U.S. dairy industry’s third-largest export market in 2018, representing $500 million in sales compared to just $154 million in 2007. Last year, however, the United States imposed tariffs on more than $250 billion worth of Chinese goods under Section 301 of the U.S. Trade Act to push back against China’s intellectual property policies and practices. China issued retaliatory tariffs that included essentially all U.S. dairy products.

Those tariffs are eroding hard-earned gains and costing the U.S. dairy industry millions in sales, market share and jobs. IDFA continues to urge the administration to include provisions in a U.S.-China agreement that will allow meaningful access to the $10 billion Chinese dairy import market.

• Correct deficit with EU

The EU has the potential to be a large export market for the United States, but American companies exported just $145 million in dairy products to the region last year compared with the nearly $1.7 billion in EU dairy products entering the United States.

Why the imbalance? High tariffs and other obstacles, such as burdensome import licensing and certification requirements, hinder sales and must be removed to correct the trade deficit.

When the USTR notified Congress last October that the Trump administration intends to negotiate a trade agreement with the EU, IDFA welcomed the news — with caution. An equitable agreement must address existing tariff and non-tariff barriers, including threats to common cheese names currently in use, that block our exports. The agreement also must be comprehensive and provide meaningful market access for agricultural products.

Free trade agreements that open markets and lower trade barriers, like the USMCA, are crucial to continuing the trend of growing U.S. dairy exports. IDFA will continue to work with federal officials and members of Congress to expand opportunities and seek more market access for dairy products abroad.

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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