Before the Trans-Pacific Partnership (TPP), U.S. cheese exporters faced a 245% out-of-quota tariff if they wanted to ship to Canada. After TPP is implemented, U.S. cheese exporters will continue to face a 245% out-of-quota tariff, but with the opportunity to compete for a larger quota of various cheeses.
That may sound like a condemnation of the deal. It is not.
While acknowledging real disappointment with the market access outcomes, the U.S. Dairy Export Council has voiced its support for TPP and called on Congress to pass it this year, provided that the U.S. government addresses dairy’s important concerns on implementation and enforcement to ensure the agreement plays out in practice as expected on paper.
Careful attention to these critical issues will assure that the market access concessions that were won, as well as access avenues already open to U.S. exporters, are not undermined by key trading partners. Ensuring that the value of the TPP package holds up as promised in the deal’s groundbreaking sanitary and phytosanitary (SPS) and geographical indication (GI) commitments is also important.
Assuming the administration follows through on these priorities, the bottom line on TPP is that the dairy industry would be better positioned for the future with the agreement in place than without it. Consider the following points under the status quo and under TPP.
Status quo: High tariffs limit U.S. dairy access to Canada and Japan.
Under TPP: The United States gains incremental access to both nations, while New Zealand gains incremental access to the United States, as well as a small amount to Mexico, our largest export market. A comprehensive analysis of the agreement by USDEC and the National Milk Producers Federation determined the net effect of all market access concessions was neutral to slightly positive for U.S. dairy.
While it could have been far better if Japan and Canada had been less intransigently protectionist, considering that they were not parties to the deal at the onset of the talks, it was a significant achievement to avoid providing one-sided market access to New Zealand, a major global competitor.
Sanitary and phytosanitary rules
Status quo: Nations often unilaterally and arbitrarily implement a new import regulation with little notice, potentially halting U.S. dairy shipments. If technical consultations on the scientific merits of the rule fail, the only recourse is the costly and time-consuming World Trade Organization dispute settlement proceeding.
Under TPP: SPS provisions create greater transparency so we see new and revised regulations before they are implemented, giving the United States more time to comment on and possibly shape those regulations. The TPP’s SPS measures also upgrade science and risk analysis, equivalence and import checks, and establish a consultative mechanism intended to provide a means to resolve SPS problems expeditiously. Finally, most of the new SPS commitments are enforceable under TPP’s dispute settlement mechanism, creating an important point of leverage to foster compliance with these obligations.
Status quo: The European Union continues to work to erode the ability of U.S. cheese and other food suppliers to compete around the world by unilaterally restricting the use of common food names to certain EU manufacturers. Its success relies on strong-arming other nations at the free trade agreement negotiating table to protect lists of names wholesale.
Under TPP: The agreement’s GI provisions break new ground by establishing a more equitable international model for GI evaluation and registration.
Status quo: Our main dairy export competitors — Australia, New Zealand and the EU — already have more trade deals in place with Asia-Pacific nations than the United States, while continuing to negotiate aggressively for more. These deals put U.S. suppliers at a competitive disadvantage. An increasingly competitive global market further magnifies these FTA advantages.
Under TPP: Already, Indonesia, the Philippines, Taiwan and Thailand have expressed serious interest in joining. Those four countries would add 450 million people to the consumer pool. All four are free trade agreement partners with New Zealand and three are FTA partners with Australia, a situation that contributes to Australia and New Zealand outselling U.S. dairy suppliers by nearly three-to-one last year ($1.7 billion vs. $565 million). TPP should help U.S. suppliers make up some of that ground.
Based on numerous and long-standing global economic and demographic projections, the industry’s future health is clearly intertwined with global trade. The TPP agreement, if properly implemented and enforced, will create trade opportunities and support must-needed export growth for the U.S. dairy industry. Properly implemented, it will help us compete in a marketplace in which we need to continue to expand as a player, and it warrants support from our industry.