By Fran Howard
The U.S. dairy industry is increasing its effort to ensure that the U.S. Senate takes action so that the United States comes into complaiance with World Trade Organization (WTO) rules regarding country-of-orgin labeling (COOL) laws.
“If the United States fails to repeal an aspect of its country-of-origin labeling law, U.S. dairy products could recive an icy reception in Canada and Mexico starting next year even though the issue isn’t directly related to dairy,” says Sara Dorland, analyst with the Daily Dairy Report and managing partner at Ceres Dairy Risk Management, Seattle.
The dairy industry stands to lose a lot if it becomes embroiled in the controversy that revolves around meat. Looking at Mexico alone, U.S. dairy processors exported 204,031 metric tons (MT), or 449 million pounds, of nonfat dry milk (NDM) and skim milk powder (SMP) last year.
“Mexico last year acccounted for 37% of total U.S. milk powder exports,” says Dorland. Mexico was also the largest destination for U.S. cheese exports as well, with 82,656 metric tons, or 182 million pounds, in purchases last year.
“Likely these are statistics that Mexico and Canada fully understand,” Dorland says. “Including dairy exports in retalitory measures could provide the leverage that both Mexico and Canada need to bring a swift end to COOL.”
In June of this year, the United States lost its fourth appeal to a WTO panel, which declared an aspect of COOL in violation of global trade rules because it discriminates against meat imports while giving an advantage to domestic meat products. Shortly thereafter, the U.S. House of Representatives repealed COOL for beef, pork, and chicken, but the U.S. Senate has not yet followed suit.
Prior to the vote in the House of Representatives, a survey by the Consumer Federation of America stated that 90 percent of Americans are in favor of requiring country-of-origin labels on meat. Others, however, argued that the current regulatory structure in the United States provides a safe food supply, regardless of origin, making labels unnecessary.
“At this point in the process, the stakes are high, and dairy, while not at the center of the argument, could be pulled into the fight,” says Dorland. “The WTO could grant Canada and Mexico authority to institute retaliatory tariffs exceeding $3 billion against U.S. exports.”
While neither Canada nor Mexico has indicated what products would be subject to retaliatory tariffs, a joint letter sent to the U.S. Senate from the National Milk Producers Federation, U.S. Dairy Export Council, and International Dairy Foods Association expressed concerns that dairy might get pulled into the battle.
“Retaliation against dairy products would come at a particularly challenging time for our industry, given the currently depressed global dairy market which makes sustaining exports in reliable markets all the more critical,” the letter states. The organizations then urged the U.S. Senate to pass legislation bringing the United States into compliance with the latest WTO ruling.
“While U.S. dairy has been well insulated from far lower world prices, loss of the significant Canadian and Mexican export markets due to excessive tariffs could be the tipping point,” notes Dorland.
To subscribe to the Daily Dairy Report, go to www.dailydairyreport.com and click on Register.