Back in 1998, the U.S. dairy industry, and in particular dairy farmers, created a new vision for their future. Prior to that point, “trade” was mostly a dirty word in dairy circles. Producers cared little about exports, focusing mainly on preventing imports. For a group of farmers and industry visionaries, however, it was clear that a growing U.S. dairy industry meant expanding opportunities for dairy in foreign markets would be critical.

The multilateral Uruguay Round trade agreements and the North American Free Trade Agreement (NAFTA) were key drivers in the development of this new approach to dairy trade policy focused on pursuing growing global markets. Subsequently, the George W. Bush Administration negotiated nine free trade agreements (FTAs) with 14 countries. Each agreement represented a new market opportunity for the U.S. dairy industry.

The FTA sprint ended all too soon, however. The last brand-new U.S. FTA approved by Congress was way back in 2011. It’s been far too long since a new free trade agreement has been negotiated, signed, and approved by Congress.

This is a real problem for America’s dairy industry because the U.S.’s competitors, especially the European Union and New Zealand, continue to enter into new trade agreements, obtaining tariff preferences over U.S. products. Our competitive disadvantage is growing.

It’s a growth area

Unfortunately, some voices in the United States are alleging that we do not need to export more dairy products despite the reality that exports are critical to the livelihood of America’s dairy producers, workers, and companies, and that there is growing international demand. Asia’s middle class already exceeds the entire U.S. population. Its growth – along with its growing appetite for nutritious dairy products – will dwarf ours in the coming years. We must compete for this market if our industry is to prosper.

That’s why the entire industry needs to speak up against the false narrative being sold by groups that are more worried about shielding foreign parties that violate their trade commitments to the United States rather than what’s actually needed for the U.S. dairy sector to thrive. Policymakers need to hear from the broad U.S. dairy community that dairy is not facing an “oversupply” of U.S. milk, but rather, the U.S. is facing a deficit of opportunities to meet the growing global demand for dairy with sustainably produced products. Exports critically complement our important domestic market.

Trade agreements are important, but they only work if countries live up to their obligations. When a country fails to do that, there must be a way to ensure it complies. The U.S.-Mexico-Canada Agreement (USMCA) has such a mechanism, and the U.S. government, via the U.S. Trade Representative (USTR), last month decided to use it for the first time. Since the July 2020 implementation of the USMCA, Canada has disregarded its USMCA commitments, in direct contrast to its own free trade refrain. They have violated their market access obligations under USMCA by not providing fair or equitable procedures for administering the dairy market access provisions.

As indicated by USTR’s decision to hold Canada to account, it’s time to stop putting dairy farmers and the U.S. dairy industry at a disadvantage and to stop choosing the welfare of foreign dairy farmers over American ones. This significant move is a powerful message to the world that the U.S. will use enforcement procedures when a country violates its agricultural trade commitments.

This signal is a very good start. But it is not enough.

The U.S. government needs to help keep American-made products flowing to consumers worldwide. And America’s dairy producers, workers, and manufacturers must continue driving home to Washington the importance of expanding markets, entering into new trade agreements that level the playing field while simultaneously making sure U.S. trading partners live up to their trade obligations.

The industry’s visionary leadership at the turn of the century saw the right path for the future. Let’s make sure we continue to build on it.

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(c) Hoard's Dairyman Intel 2021
June 10, 2021
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