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Industry Issues

Trade is not a ‘nice to have’ — trade is essential

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®.

While 2018 delivered record exports for the dairy industry, we’re now beginning to see significant disruptions in U.S. food and agriculture trade with key trading partners. As a result, the first quarter of 2019 has been a dismal one for dairy exports.

Mexico is the number one market for many American -made and -grown products. Last year, we shipped $1.4 billion of milk, cheese, whey, ice cream and other dairy items to Mexico. But as 2019 has worn on, ongoing trade disputes with Mexico have begun to take a toll, biting into U.S. exports and squeezing American jobs.

USDA has lowered its expectations for trade between the United States, Mexico and Canada “due to domestic factors and trade uncertainty.”

Clearly, retaliatory tariffs from Mexico and China are affecting U.S. dairy exports in a substantial way. Let’s look at Wisconsin. The top cheese-producing state is selling 150 fewer truckloads of cheese to Mexico — one of the lightest volume shipments over the past six years. The Chinese are buying less cheese from Wisconsin, too. Year-over-year comparison from July to March shows a decline of 16 million pounds, or 44%. Whey sales also are down, suffering from the trade war as well as the spread of African swine fever, which has wiped out nearly 5 million hogs in China and Vietnam, weakening demand for feed. From July to March, U.S. dry whey exports to China were down 107 million pounds, or 32% from the previous year.

And though the recent back and forth with Mexico on border security has been resolved for now — putting any talk of additional tariffs to rest — the situation with China remains fluid. Last month, China retaliated against the United States by raising tariffs once again on dairy ingredients — infant formula, ice cream, casein/caseinates, high protein whey, and other products. Nearly one-third of Wisconsin’s agricultural and food exports have been affected by the retaliatory tariffs levied by China. Already the state has lost $58 million in cheese and whey sales from the previous year.

Uncertainty with China and further tariff threats with key trading partners threaten to permanently weaken U.S. dairy’s export position. That’s why it’s so important that Congress pass the U.S.-Mexico-Canada Agreement and that the Trump administration move swiftly to repair the U.S-China trade relationship.

Our government representatives need to recognize that trade is not something that’s “nice to have.” For dairy, trade is essential. Trade is the difference between expanding and curtailing operations. Trade is a lifeline for dairy farmers. Trade is our growth strategy.

Today, roughly one in six dairy cows produce milk for export. Despite trade uncertainty with major markets, U.S. dairy exported $5.6 billion to customers who have come to rely on the United States to offer the highest-quality dairy products in the world. Although these gains have dropped off in early 2019, sales of American whey, lactose, milk fat, casein, and milk powders have surged in recent years, not to mention huge and growing demand for cheese and butter.

Over the last 25 years, U.S. food and agricultural exports to Canada and Mexico more than quadrupled under the former North American Free Trade Agreement, or NAFTA, growing from $9 billion in 1993 to nearly $40 billion in 2018. NAFTA not only created a reliable, high-quality supply of food products for North American consumers, it also supported roughly 900,000 American jobs in food and agriculture and related sectors of the economy. USMCA builds on the success of the NAFTA agreement, makes improvements to further enhance U.S. food and agricultural exports, and will ultimately lead to freer markets and fairer trade.

So far, however, Congress has refused to vote on it. The longer Congress waits to vote on the deal, the more uncertainty in the dairy market, making it more likely that our foreign customers move on to find other suppliers.

Now that the recent trade dispute with Mexico is behind us, it is essential that Congress look past politics and focus on getting this deal done. USMCA grows American jobs, expands U.S. export markets and restores America’s reputation as a reliable supplier of the best dairy products in the world.

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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