by Jaime Castaneda, U.S. Dairy Export Council and National Milk Producers Federation
This month’s meeting between trade ministers from the 12 countries participating in Trans-Pacific Partnership (TPP) negotiations will be unique. For the first time since talks began in 2008, U.S. trade representatives will be negotiating with the mandate of Trade Promotion Authority (TPA).
TPA simultaneously raises hopes that this meeting will yield a final agreement and raises expectations for negotiators to bring home a positive deal for the U.S. dairy industry.
TPA legislation, signed into law by President Obama on June 29, is an indispensible tool for the United States to negotiate and finalize trade deals. In addition to providing the U.S. Trade Representative (USTR) guidance on negotiating objectives, TPA mandates that Congress hold a straight up or down vote on any trade agreement. U.S. negotiating partners have been understandably hesitant to put forward their best offers (particularly on sensitive products like dairy) and make tough compromises with the possibility looming that a legislator might ultimately tinker with carefully negotiated trade-offs. TPA removes that possibility.
It not only paves the way for U.S. negotiators to press our trading partners to table their best offers, it demonstrates that we are serious about reaching a deal.
The first deal we expect to reach is TPP.
Now that U.S. negotiators have TPA, we expect them to secure a TPP agreement that delivers a balanced agreement and net trade gains for the U.S. dairy industry. Two important pieces on the road to accomplishing this goal are not yet finalized, but well along:
1. Sanitary and phytosanitary (SPS) provisions that create greater reliance on science-based regulations and are fully enforceable.
2. Workable requirements for geographical indications that help preserve the continued use of common cheese names in the face of the European Union’s aggressive global campaign to monopolize the use of many generic cheese names for their own producers.
One major element, though, of TPP remains far too up in the air: the heart of an FTA itself—net market access gains. U.S. dairy exporters are still waiting to see commercially meaningful access for all products to the highly protected markets of Canada and Japan.
The dairy industry is working to make our points heard on Capitol Hill. Current dairy tariffs in both the Japanese and Canadian markets are prohibitively high for certain products—more than 100 percent for certain key products. U.S. suppliers already do substantial business in both nations, but the countries’ dairy use and steep tariffs, as well as non-tariff barriers to trade, suggest there is significant room for growth. The United States and Japan have made progress toward an agricultural market access deal that includes dairy, but more work is needed to ensure that access opportunities expand over time for all products. Japanese officials were said to be waiting for TPA before making final offers. That time has come. Canada has, to date, refused to even engage on agricultural market access talks for protected sectors like dairy.
In the meantime, other TPP nations are looking to expand their dairy access to the United States. The U.S. dairy industry has been public, clear and consistent about the importance of balancing whatever the United States grants on dairy imports with commercially meaningful new access into the Canadian and Japanese markets for the same major dairy product categories. It is imperative to achieve a balanced outcome on market access.
Even though we have likely entered the final few weeks of talks, much work remains. Trade representatives from all 12 TPP members will meet in the days leading up to the July 28-31 ministerial. How U.S. negotiators use TPA will become evident as the month plays out.
History has proven that well-negotiated free trade agreements benefit the U.S. dairy sector. We have free trade deals in place with 19 nations. U.S. dairy export value to all but two posted double-digit compound annual growth rates since implementation. With the help of the North American Free Trade Agreement, U.S. dairy sales to Mexico, our No. 1 customer, rose more than six-fold since implementation to $1.6 billion last year. Good trade agreements have been critical in driving U.S. export volume to the equivalent of 15.4 percent of the U.S. milk supply last year.
Those are clearly favorable results. And they are not only good for the whole U.S. dairy supply chain but for the entire country, given that the dairy sector accounts for 1.6 million jobs, with a heavy concentration in rural communities where good jobs are harder to find.
The industry put its faith in U.S. negotiators by backing TPA legislation in what was a prolonged and difficult effort to move the legislation through Congress. There is clear potential in this agreement for America’s dairy farmers and dairy processors if key elements are successfully negotiated, particularly the triangle of outstanding market access issues relating to Canada, Japan and New Zealand. The next few weeks will show how U.S. negotiators respond to the faith we have placed in them.