The Dairy Trade Coalition
   Saving the Spotted Cow for Generations to Come


 

"Debunking The Global Dairy Market Myth"

1. What are the barriers and opportunities involved with the U.S. exporting more dairy products? Price is the barrier.  America's dairy products have traditionally been above world prices.  To export bulk commodity dairy products into the world market, America's price has to drop precipitously.

Niche and value added products such as whey, lactose, ice cream, and novelty items can and are being exported without the benefit of trade agreements.  Yet, the volume of these exports is not likely to increase profits for dairy farmers.  To export large quantities of dairy products, the U.S. must export commodities such as skim and whole milk powders, butter and Cheddar cheese -- all highly price sensitive.

 
2. How can U.S. dairy farmers compete against dairy exporting nations with lower milk production costs or significant export subsidy programs? The U.S. can't, but why compete with trade distorting state trading enterprises like the NZDB, and others, to sell skim milk powder or butter to foreign markets with little potential benefit to American dairy farmers?  The U.S. should not trade its market access for the doubtful opportunity to sell into mediocre markets.  Of relevance is a statement by NZDB spokesman, Chris Kelly, who is reported as saying, "if the board [NZDB] could get a bilateral trading agreement with the U.S. tomorrow it would 'do anything' to get it.

 
3. What do you think the goals of U.S. trade negotiators should be vis-à-vis the competing positions of the Cairns Group and the European Union regarding (a) dairy imports and exports in the next round of trade talks; and (b) federal milk marketing orders, traditional price support programs and other important domestic programs?

 

 The U.S. needs a sensible, business-like dairy trade policy that recognizes the multi-functionality of family dairy farms and the reality of what is to be gained as opposed to what can be lost.  If the U.S. demands total liberalization by other countries, they could demand elimination of our agricultural programs.  The Canadians have identified 99 programs which they allege add $5.63 cwt to the American dairy producer's milk check.  They have targeted Federal milk marketing orders, subsidized Western water, etc.  Few dairy farmers realize that many important domestic programs could be sacrificed by the U.S. negotiating position.
4. Would a freer trade policy permit more imported dairy products into the U.S.?  If so what would be the impact on farm milk process and other items of concern at the grassroots level, specifically on small to mid-size dairy operations?

 

 The National Milk Producers Federation, USDEC, and other want the European Union (EU) to eliminate its subsidies and, in return, the U.S. is to eliminate its tariff rate quotas or TRQs for dairy product imports.  Eliminating TRQs will allow imports to enter the U.S. without duty or quota.  This will mean that the U.S. price will, in effect, be the same as the world market price.  While there are many variables involved, it is likely this would mean farm milk prices at or below current depressed U.S. milk price levels which are bankrupting dairy farmers across the nation.
5. What can the United States learn from the Uruguay Round? The position of the American negotiators during the UR was based on the belief that if the European Union lowered its dairy subsidies the United States would benefit from increased U.S. diary exports.  However, according to the French dairy organization CNIEL, the large EU subsidy cuts in the UR resulted in a loss of 20% of dairy export volumes for the EU in milk equivalent terms.  The EU share of the world market trade fell from 43% to 34%.  In effect, the principal beneficiaries of the United States trade position were the Oceania countries (Australia and New Zealand) hose exports rose by 35%.

Allowable volumes of exports under the United States DEIP program were significantly lowered, access on dairy imports into the U.S. were raised and the United States ability to put dairy products under quota was traded away.  In other words, America's negotiating position disadvantaged the United States and the EU and benefited the Oceania countries.  Yet, it appears that the American negotiators have not learned their lesson as they are pursuing the same failed strategy for the next round.

 
6. How would the cost of free trade to U.S. dairy farmers compare to the benefits from exporting more dairy products? There is much concern that the costs will outweigh the benefits of free trade for many American family dairy producers.  There are three (3) premium global dairy markets; the European Union, Japan, and the U.S.  Why give up total access to the U.S. market for the right to compete with lower cost producers such as New Zealand and Australia who can and will undersell us?  Sir Dryden Sprint (former Chairman, NZDB), in a speech to the World Dairy Forum on July 3, 1998, said, "It is too easily forgotten that demand for imported dairy products around the world is very limited, and therefore opportunities for trade, very narrow.  Markets open to competitive supply are squeezed between, on the one hand, the protective arrangement in place in the major consumption markets in Europe, North America and Japan and, on the other hand, the limited requirements of markets in the rest of Asia, the Middle East and South America."

Dairy Profit Weekly (11-16-98), covering the Intl. Dairy Trade Puzzle Workshop for Dairy Economists and Policy Analysts held in Baltimore (1998), reported that, "Exports have long been touted as the last frontier and hope for the U.S. dairy industry, but the nation's experts now say that a stronger export market won't put any more dollars in U.S. producer's pockets, and question whether it's even possible for the U.S. to become a major dairy exporter."  A Kraft spokesman was reported as saying, "Kraft already has decided not be a 'major trading house' in world markets."

The NZDB, Kraft and, increasingly, American dairy economists, apparently understand dairy market realities.  Do the free traders?  We think not.
7. How would the following countries' dairy exports be effected in the new round:  (a) Oceania, (b) the European Union, and (c) the United States? According to a New Zealand Ministry of Agriculture and Forestry report (7 August 2000), "New Zealand has the potential in the medium term to surpass the European Union as the dominant exporting country in International trade."  In addition, a Dairy Monitoring Report (July 2000) indicates that "New Zealand has the potential in the medium term to surpass the EU as the dominant exporting country in international dairy trade.  North America's share of dairy export trade is not expected to change significantly."
8. What is agriculture multi-functionality and how is it defined in the United States and the European Union?

 

 While the EU position on multi-functionality is well known, the U.S. position is unknown to the DTC even though Secretary Glickman has mentioned it on several occasions.`
9. There  are now very contentious issues within the dairy industry.  Producers are very upset that U.S. standards may be changed to allow for the use of milk protein concentrate and other forms of dry ultra filtered milk as ingredients in domestic natural cheese.  Furthermore, standards may be changed to allow for globalization of U.S. Grade A standards.  Is there any connection with these issues and trade policy? There is an absolute connection because the rationale for many of these changes is to harmonize U.S. standards with the rest of the world.  If we expect other countries to buy our exports and accept our standards, the U.S. must be prepared to accept other countries' standards on par.  Furthermore, in relation to the milk concentrate issue, this product which is free of quota and duty can no longer be put under quota because the U.S. traded away Section 22 Dairy Import Quotas in the Uruguay Round.  Lastly, although producers may be disadvantaged and Members of Congress may wish to pass legislation to prevent these changes this option may be moot because it will become a WTO matter superseding U.S. sovereignty.

 

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