Guest Columns

Perspective:
Industry Issues

NAFTA needs revision, not revocation

Michael Dykes, D.V.M.

Michael Dykes, D.V.M., is president and CEO of the International Dairy Foods Association. He contributes this column exclusively for Cheese Market News®.

It’s been exactly five weeks since the inauguration of President Donald Trump, and he’s moved quickly to take action on several of his campaign themes, including trade. When it comes to the North American Free Trade Agreement (NAFTA), IDFA believes maintaining the pact’s positive provisions should be a White House priority, along with renegotiating unfair and restrictive aspects. Overall, NAFTA has been very positive for the U.S. dairy industry, and we strongly support revisions, but not wholesale revocation.

Just over a decade ago, the United States was a net importer of dairy products. Since that time, U.S. dairy exports have risen from $1.8 billion to $4.7 billion in 2016. Our nation now benefits from a dairy trade surplus of more than $2 billion. We export about one day’s worth of milk per week to the world. In fact, nearly one-quarter of all U.S. dairy exports went to Mexico last year.

• Maintain relationship with Mexico

Our exports to Mexico were worth more than $1.22 billion in 2016, making it the largest market for U.S. dairy products. The United States is the dominant supplier of dairy products to the Mexican market, capturing 75 percent market share, and NAFTA allows those products to enter duty free. The top U.S. dairy exports to Mexico last year were nonfat dried milk at $487 million and cheese at $362 million.

With Mexico, our main objective for NAFTA will be to protect our current market access and preserve the excellent trade relationship we currently have. Several of our member companies have operations in Mexico, and backtracking on the gains made under NAFTA would be devastating to them and the U.S. dairy industry.

That’s why I’m joining Tom Vilsack, president and CEO of the U.S. Dairy Export Council, and Jim Mulhern, president and CEO of the National Milk Producers Federation, for a visit to Mexico next month. While there, we will meet with high-level officials to discuss the importance of the collaborative relationship between our countries’ dairy industries.

• Canada is a different story

Unfortunately, we haven’t had the same success with our trading partner to the north. Our second priority in a NAFTA renegotiation would be to obtain fair market access for U.S. dairy exports to Canada.

When NAFTA was crafted 23 years ago, two major agricultural issues for the United States were not resolved.

One is Canada’s protectionist and onerous quota system that places tariffs from 200 percent to more than 300 percent on some U.S. dairy products. That’s just unacceptable. The system never should have been allowed in the original agreement, and it certainly shouldn’t be allowed to remain under a renegotiated pact.

The other issue, unrelated to dairy, involved the Canadian Wheat Board and its exclusive rights to export wheat and barley from Canada. Although no longer in operation, the board was a federal government agency that gained unfair trading advantages by controlling the movement of grains in and out of Canada.

A similar obstruction to fair trade is developing across Canada under the guise of a new ingredients pricing strategy. Implemented in Ontario last year, the strategy provides incentives to Canadian companies to use domestic ingredients instead of imports from the United States and offers a subsidy for manufacturing products containing those ingredients. The subsidy allows Canada to export surplus skim milk powder at below the cost of production and increase exports in a way that would violate the country’s commitments with the World Trade Organization (WTO) and NAFTA. We’re hearing that other provinces are starting to implement the strategy, and nationwide adoption may be imminent.

In the past month, IDFA joined NMPF, USDEC and the National Association of State Departments of Agriculture (NASDA) in sending two letters about Canada to President Trump. We urged him to take immediate action on Canada’s trade violations and to raise its protectionist dairy policies during discussions with Canadian Prime Minister Justin Trudeau when he visited the White House.

We were happy to see House Speaker Paul Ryan share his concern about these policies with Canadian Foreign Minister Chrystia Freeland and Prime Minister Trudeau during their separate visits to Washington, D.C.

We’re continuing to share the message about trade violations and fair market access with President Trump’s Cabinet members and nominees, the leaders and members of the House and Senate agricultural committees and relevant trade committees, and even the Canadian public. I’ve presented our position in interviews that were featured recently in news segments aired by the Canadian Broadcasting Corporation and the Canadian TV Network.

• GIs and SPS measures

Two other areas that need attention during renegotiation are geographical indications (GIs) and sanitary and phytosanitary (SPS) measures.

The U.S. dairy industry doesn’t dispute the need for legitimate GIs, but some countries use them as nontariff barriers to trade to limit competition and market access. Canada and Mexico each have signed bilateral trade agreements with the European Union that granted protection for several generic cheese names used in the United States. Those agreements hurt U.S. cheese companies as well as Canadian and Mexican companies.

In renegotiation, the U.S. dairy industry aims to secure protection for generic terms and ensure a due process for GI applications under NAFTA.

Sanitary and phytosanitary measures are used by all countries to ensure that imported food is safe and to prevent the spread of pests or diseases. While the measures may result in restrictions on trade, the WTO states that governments should not go beyond what’s necessary to protect consumer health, and the measures should not be used to protect domestic companies from global competition.

IDFA wants provisions that build on and enhance the WTO rules and provide for consultative and dispute-settlement mechanisms to resolve issues between governments in a timely fashion.

It’s clear that the U.S. dairy industry needs the North American market and NAFTA. IDFA plans to continue to raise these issues at every opportunity — working with our colleagues at NMPF, USDEC and NASDA — to make sure dairy is at the negotiating table and our collective voice is heard.

CMN

The views expressed by CMN’s guest columnists are their own opinions and do not necessarily reflect those of Cheese Market News®.

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