U.S. Dairy Export Council Reiterates Support of Trans-Pacific Partnership

February 23, 2012 04:42 AM

Source: U.S. Dairy Export Council

Today, the U.S. Dairy Export Council (USDEC) sent a letter and a report to U.S. Trade Representative Ron Kirk and U.S. Secretary of Agriculture Tom Vilsack that continued to express support for the Trans-Pacific Partnership (TPP). But it also cited ongoing concerns about pervasive anti-competitive practices by the New Zealand dairy industry that negatively impact USDEC member companies as they seek to build market share and compete in the global market.
The confidential report was prepared for the use of the U.S. government TPP negotiating team. It details the impact that New Zealand dairy policies have imposed on the U.S. dairy industry, as well as a handful of small competitors that have struggled to gain a toehold in the country’s highly concentrated dairy sector.
The USDEC report is intended to provide information regarding challenges faced by those forced to compete against a virtual commercial monopoly that alone directly controls more than one third of global dairy trade, as well as further leveraging its power to direct additional sales through a variety of third country business arrangements. An executive summary of the report’s key findings is available here.
The letter accompanying the report (available here) noted that USDEC has consistently championed expanding dairy trade opportunities. The Export Council not only actively supported U.S. FTAs with Korea, Colombia, Panama, Central America-Dominican Republic, Chile, Singapore, as well as others, but also strongly advocated an aggressive U.S. Doha Round proposal aimed at harmonizing global tariffs at lower levels and eliminating other trade distorting practices such as the use of export subsidies.
Likewise, USDEC has advocated for a high-quality TPP agreement that, in addition to achieving state-of-the-art trade rules and new market access with important economies, including Japan and Canada, also addresses many non-tariff issues that impede greater U.S. exports. For example, USDEC has played a leading role in seeking new commitments in the area of sanitary phytosanitary technical disciplines, as well as in the protection of common food names in the face of aggressive European efforts to restrict generic product terms globally. The report on New Zealand’s anti-competitive practices is part of that effort to effectively tackle major non-tariff concerns negatively impacting U.S. dairy exports through the TPP.
“We believe that that the TPP must not be used to further enhance the market power of the 800-pound gorilla in global dairy trade,” said Tom Suber, president of USDEC. In the letter, USDEC asked Ambassador Kirk and Secretary Vilsack to closely examine the lack of meaningful movement during the past decade towards more robust competition in New Zealand and the world price discrimination the situation has fostered at the expense of U.S. exporters.
“New Zealand seems to want to have robust and open competition everywhere except in their own dairy industry,” said Mark Davis, Chairman of Davisco Foods International and a long-standing USDEC member. “Our concerns center on the fact that the New Zealand government has purposely made exceptions to its regulations to permit one company to gain a tremendous amount of market power. If the TPP does not address the actual current situation in New Zealand, it will only further cement that dynamic in ways that punish our industry.”
“It is telling that New Zealand has tried to steer the U.S.-New Zealand discussions towards focusing on expanding their access to one of the world’s largest and most lucrative consumer markets, while steadfastly resisting to acknowledge the reality that they have aided and abetted the interests of one company in ways that impair other companies within the TPP region,” said Suber.
Davis added that, “It defies common sense to suggest, as New Zealand does, that competition is alive and well in a country where a sector that accounts for fully a quarter of its total exports is dominated by a single firm that has been given special privileges that allow it to maintain roughly a 90% market share.”
New Zealand’s own Prime Minister has described this firm as enjoying a “monopoly position” in its dairy industry. Yet the country has maintained that its current regulations on dairy are for the most part operating effectively enough.
The report rebutted the myth that New Zealand is incapable of impacting world dairy trade and is not a global price setter due to its relatively small amount of milk production compared to the total volume produced in the world. Its leading role as the world’s largest dairy exporter and that milk price swings can be driven by relatively small changes in supply and demand, make New Zealand more than capable of having dramatic impacts on global trade and on prices around the world.
Additionally, as the report also notes, contrary to suggestions that New Zealand is reaching the end of its growth potential, milk production growth from 2010 to 2011 was an impressive 9%. Overall, the country’s milk production has increased 17% in just the past five years. That level of growth equals slightly less than one-third of total milk production in Australia, the world’s third largest dairy exporter.
USDEC expressed its strong commitment to continuing to work with the Administration on the important priority of ensuring that TPP expands opportunities for exports and addresses significant foreign impediments confronting the U.S. dairy industry.
The U.S. Dairy Export Council (USDEC) is a non-profit, independent membership organization that represents the global trade interests of U.S. dairy producers, proprietary processors and cooperatives, ingredient suppliers and export traders. Funded primarily by the dairy checkoff program through Dairy Management Inc., USDEC aims to enhance U.S. global competitiveness and assist the U.S. industry to increase its global dairy ingredient sales and exports of U.S. dairy products.
USDEC accomplishes this through programs in market development that build global demand for U.S. dairy products, resolve market access barriers and advance industry trade policy goals. USDEC is supported by staff across the United States and overseas in Mexico, South America, Asia, Middle East and Europe.

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