WISCONSIN STATE FARMER, September 28, 2000
by JAN SHEPEL

As the free-trade train rumbles into the future, some are starting to ask if freer trade will really be better for dairy farmers in the country and in the Midwest in particular, where much of the milk goes into products that could be traded on the international market.

A group, organized by the Dairy Trade Coalition, gathered in Madison Sept. 25 to talk about the issue with members of the agricultural media.

Dr. Enrique Figueroa, Deputy Under Secretary for Marketing and Regulatory programs at the USDA, read from a prepared statement that began with the premise that "export increases are necessary to facilitate expansion."

The ag economist and former Cornell professor, who joined USDA in 1997, said it is the trend in U.S. ag policy to make all agriculture programs more market oriented. The trade negotiations with other nations in recent years have been aimed at limiting the "trade distorting" programs like domestic support programs in other countries.

Five major U.S. dairy organizations support the trade positions of the government, Figueroa said.

But others who spoke with reporters are not so sure that increasing dairy exports helps U.S. farmers. Tom May, vice president of Trugman-Nash, Inc., a dairy trading company, believes it is a fallacy that the export market holds the key to the future for U.S. dairy producers. "We who have been intimately involved with trading dairy products, totally disagree with that," he said.

"We need the industry to take a long, hard look at all the ramifications," May said.

May made the point that there are three really top markets for dairy products in the world. The first is our own domestic market; others are Europe and Japan. "Why do we want to give up access to our market which is one of the best in the world for the right to sell into poorer markets," he said. "Why do we want to compete with New Zealand to sell skim milk powder to Viet Nam."

May said he believes the free trade agreements amount to a loss of some of the best markets for U.S. products.

Figueroa countered that the USDA and the administration believe the U.S. dairy industry can compete competitively in world markets. As in all negotiations, U.S. leaders have to "give up something to get something" he said.

May said, from his years of experience, that currency fluctuations play a major role in international trade. Right now, he said, the Australia and New Zealand dollars are low, while our dollar is high, making products from those countries more attractive. "That's another risk factor in international trade that you don't have in domestic trade," he said.

Dairy producers should also be aware that some of the countries we will be negotiating with, appear to be targeting domestic agricultural programs as illegal under World Trade Organization (WTO) laws.

Jim Eichstadt, who until last week was General Manager of Family Dairies USA in Madison and now is a policy advisor with the Aegis group, said one of the problems for producers is that the public is not allowed to know what is on the negotiations table when government representatives meet.

Eichstadt said dairy farmers in Canada put a shot across the bow with a list of 100 U.S. programs their organization feels would qualify as "subsidy programs" under the WTO. The list includes federal milk marketing orders, dairy compacts, Conservation Reserve Program and such bedrock programs as Rural Electrification, food stamps and water subsidies in the West.

"If asked, farmers would probably be disturbed to learn that those are on the table," he said.

Mario Castillo, president of the Aegis group and organizer of this week's meeting in Madison, said "rank and file farmers are unaware of these programs being in jeopardy" from WTO negotiations.

Gerard Kiely, the top agricultural counselor on Agriculture, Fisheries and Consumer Affaris for the Delegation of the European Community, said he doesn't believe "there's any program that couldn't be challenged in the WTO. You can't say any (U.S.) program is safe."

Eichstadt said Congress may find itself with far fewer tools to help U.S. farmers if the WTO challenges win in court of trade.

Eichstadt also noted that with the lowest manufacturing milk prices in 20 years, it would have seemed likely that milk products would have started flowing out of the United States to those international buyers looking for low-cost products, but that hasn't happened. "How much lower do prices have to go before exports increase," he said.

"The cost of globalization is the loss of sovereignty in may key areas of concern," Eichstadt said.

Kiely, who is from Ireland, said criticisms of Europe's agricultural policies have been characterized in the United States, as a "wonderful gravy train for fat-cat farmers."

That characterization might have been true 10 to 15 years ago, he said, but today it is "just not true." The vast majority of farmers in Europe are "barely making a living." He said aid from the U.S. government to U.S. farmers is roughly four times the support level given by the European countries to their farmers.

Also, since Europe is a large importer of agricultural products and food, it does not fit with the description of Europe as protectionist, Kiely said.

European dairy farmers, he said, operate under a quota mechanism that has been in place since 1984. European people and governments strongly support family farmers no just as food producers, he said, but for their social, economic and environmental attributes.

In trade negotiations, Kiely predicted the European Community will defend family farms because it believes in the value of keeping people in rural communities. "We want to keep as many farms as possible," he said.

May, who has traveled extensively in his work, said the European countries believe in supporting farms also for their "tourism value" visitors to rural areas in many European countries expect to see picturesque farms with fences, people and livestock. There is a recognition of the fact there, he said.

Figueroa said with the downturn in the domestic agricultural market, income support for U.S. farmers is not likely to disappear as was foreseen when Congress passed the 1996 Farm Bill. But, he said as farms in this country concentrate, there is less and less public support for farmers, because the public sees "farmers" as large operations.

The USDA official [sic] commented that American farmers will fare well and thrive on a level playing field.

Kiely said that current world market prices are lower than internal European and U.S. prices. He fears freer trade would lower prices overall to the lowest price available in the world.

Genetically modified products are another question. Kiely said Europeans believe that if a food product contains a GMO, consumers have a right to know. The only GMO issue related to dairy, of course, is bovine somatotropin bST. Kiely said there is a ban on its use in Europe.

Kiely said the Uruguay Round of GATT negotiations took the "back fat" out of agricultural programs and produced "no great pain on producers." But this time around, "any concessions we have to make will have to be matched by other countries," he predicted.

Figueroa commented that when he was at Cornell, he worked with apple growers in New York who were interested in increasing exports. They believed that if they got a percentage of their product off the domestic market there would be some price increase for domestically sold apples.

He said the same model could work for the dairy industry as well.