"Today, the two most powerful economies in the world began to restore a positive, mutually beneficial trade relationship, and dairy producers and processors across the United States are grateful. To put the importance of this development in perspective for America’s dairy industry: Over the next decade, China represents a $23 billion market opportunity for U.S. dairy, and it is essential to our producers and companies that we have a trade relationship with China that further levels the playing field for American dairy and provides expanded market access for our growing industry. In addition to purchases of U.S. agriculture products including dairy, the deal includes commitments by the Chinese to reduce non-tariff barriers affecting infant formula and extended shelf-life milk—an important concession achieved by the U.S. administration. We will learn more about the details of this phase one deal in the coming days.
“The dairy industry welcomes news of this deal and looks forward to beginning negotiations on phase two that must remove all existing tariffs and non-tariff barriers and create a level playing field for U.S. dairy products. IDFA is hopeful that this deal—alongside the recently implemented phase one Japan deal as well as the U.S.-Mexico-Canada agreement—signals the United States has embraced a market- and rules-based system of international trade that is essential for the future of the U.S. dairy industry.
“U.S. dairy relies on trade agreements to open new markets and increase exports, thereby supporting American jobs and wages. After being a net importer of dairy products roughly a decade ago, the United States is now the world’s third largest dairy exporter, providing high-quality dairy foods to consumers in more than 140 countries around the world—and counting.”
Background on U.S.-China
The governments of China and the United States have imposed billions of dollars in retaliatory tariffs during the two-year trade dispute, which has put a drag on America’s dairy industry. U.S. dairy export value to China peaked in 2017 at $576 million, fell 13% to just over $499 million in 2018, and is $343 million through November of this year—a 26% drop over 2018. Until this year, China had become the leading market for U.S. whey and a growing customer for U.S. cheese. Retaliatory tariffs, however, have derailed that potential and cost the U.S. dairy industry millions in sales, market share and jobs.
China bought 33% of U.S. whey exports by value in 2018. Overall, shipments added up to $174 million. Year-to-date through November 2019, with retaliatory tariffs still in place, export value of U.S. whey exports totaled $101 million. That was down 38% from 2018 and 53% lower than pre-tariff 2017.
China is becoming a major market for cheese, with total imports up by 20% annually over the past five years. With U.S. product pricier due to higher tariffs, other sellers have been quick to fill in. Through November 2019, U.S. export value fell 34%. That’s on top of a 39% loss in the second half of 2018.