The U.S. International Trade Commission today opened a two-day hearing to investigate the likely impact of the U.S.-Mexico-Canada Agreement (USMCA) on the American economy, specific industry sectors and consumers. A total of 45 industry groups and stakeholders were invited to provide testimony today and tomorrow, including Michael Dykes, D.V.M., president and CEO of the International Dairy Foods Association.
In his testimony, Dykes outlined the importance of global trade and new free trade agreements to the U.S. dairy industry. He noted that the United States now benefits from a dairy trade surplus of more than $2 billion, after being a net importer of dairy products only a decade ago, and that American companies export dairy products to more than 140 countries.
“Free trade agreements like the USMCA that open markets and lower trade barriers are crucial to continuing this trend of growing U.S. dairy exports,” he said. “Maintaining and expanding access to international markets is essential for the future success of the U.S. dairy industry.”
Mexico Our Largest Market
Calling Mexico “an indispensable partner” for the industry, Dykes said U.S. dairy exports to the country now account for one-quarter of total dairy exports supporting nearly 30,000 American jobs. In 2017, Mexico imported more than $1.3 billion of U.S. dairy products.
Dykes said the industry is pleased that the agreement preserves duty-free market access to Mexico and contains geographical indications (GI) provisions within the intellectual property chapter to protect the use of certain common food names, such as gouda and mozzarella, by U.S. cheese makers.
However, he said, the dairy industry had hoped the GI provisions would go further to protect more cheese names. “Unfortunately, the fate of asiago and many other cheeses remains unclear,” Dykes explained.
In addition, U.S. tariffs on steel and aluminum imports from Mexico are having a negative impact on dairy exports because Mexico has imposed retaliatory tariffs of 25 percent on American cheeses.
“We’ve seen sales decline 10 percent for cheese in July, August and September due to the tariffs,” Dykes said. Until the U.S. tariffs are lifted, “U.S. dairy’s access to the Mexican market is at risk,” he added.
Concerns About Canada Remain
Turning to Canada, Dykes commended the Office of the U.S. Trade Representative for “negotiating strong transparency provisions that hold Canada accountable for publishing data and notices on a public website in a timely manner. This is critical for monitoring and enforcing the USMCA.”
While he noted that the agreement appears to have addressed Canadian dairy policy measures that restrict market access, he cautioned that the corrections need to be monitored and enforced.
Canada’s current dairy ingredients pricing strategy includes a Class 6 program that effectively blocks U.S. ingredients from entering the Canadian market and a Class 7 program that allows Canada to export surplus skim milk powder at prices below the cost of production. Although the new agreement will eliminate the Class 6 and 7 programs, Canadian processors will still be able to use Canada’s “make allowance” formula, or processor cost, that is nearly double the U.S. version. This formula will allow large processor margins that will drive expansion and provide Canadian dairy-protein processors a competitive advantage over U.S. companies.
The new agreement also calls for duty-free quotas in Canada for the majority of U.S. dairy products, but Dykes warned that the Canadian dairy industry could find ways not to fill the quotas.
“There’s precedent for Canada not to fill quotas. Several World Trade Organization quotas are routinely left unfilled for milk protein substances and products of natural milk constituents,” Dykes said.
“For these reasons, we believe that actual market access for the U.S. dairy industry to the Canadian market could be much lower than what was negotiated,” he concluded.
Read the full testimony here.
The International Dairy Foods Association (IDFA), Washington, D.C., represents the nation’s dairy manufacturing and marketing industry, which supports nearly 3 million jobs that generate more than $161 billion in wages and has an overall economic impact of more than $628 billion. IDFA members range from multinational organizations to single-plant companies. Together they represent approximately 90 percent of the milk, cultured products, cheese, ice cream and frozen desserts produced and marketed in the United States and sold throughout the world. The diverse membership includes numerous food retailers, suppliers, cooperatives and companies that offer a wide variety of nutritional dairy products and dairy-derived ingredients. Visit IDFA at www.idfa.org.