NAFTA talks: Contentious dairy issues come to forefront

A year after an election that included much talk about unfair trade deals, we find ourselves in the middle of one of the most important modern-day trade negotiations.

It is no secret that the North American Free Trade Agreement (NAFTA) is crucial to our modern dairy economy. Total U.S. dairy exports equal 15 percent of total U.S. milk production – or one day’s worth of production per week. Of these exports, close to 40 percent is exported to our NAFTA trading partners.

There has been discussion on whether the percentage we ship to Canada is accurate with that country’s market-distorting practices, but we do know that the 25 percent exported to Mexico is correct. Last year, we shipped $1.2 billion worth of product south of the border. The loss of Mexico, where we hold a 73 percent market share on dairy foods, would be the ultimate trade deal failure for the dairy community.

The No. 1 priority for the dairy community, along with the rest of agriculture, is to “do no harm” to our existing markets and to work toward more favorable access. To our benefit, the U.S. trade representative (USTR) incorporated those agricultural priorities in the official negotiating objectives.

DBMMC strongly advocated for the need to maintain our current zero tariff for dairy exports to Mexico. If we were to lose NAFTA, Mexico would revert to “most favored nation status,” raising tariffs on cheese up to 60 percent and on skim milk powder to 45 percent. Losing access also would push Mexico to finalize negotiations with the European Union to fill in as a substitute for U.S. dairy.

The second main target for dairy through these efforts is to improve our products’ ability to better reach Canadian customers. In the original NAFTA deal in 1994, Canada’s dairy protectionist measures went unaddressed. Now, probably more than ever, we are seeing the effects of supply management, quota and tariff barriers and discriminatory pricing classes. 

The fourth round of negotiations wrapped up in mid-October with dairy being one of the most contentious issues. As expected, the U.S. did not put forward dairy-specific proposals in the first three rounds because negotiators wanted to kick off talks with less sensitive topics. But in the fourth round, the U.S. put forward text that would effectively eliminate Canada’s supply management system by removing the market restrictive tariffs on supply-managed dairy foods over the next 10 years.

We should celebrate the fact that our officials have taken our industry concerns straight to the negotiating table to work toward a solution. However, we also must be careful not to upset the apple cart in our overall trade success via NAFTA as Canada remains steadfast in their approach to protect their internal dairy markets. Our counterparts to the north view the proposal as a “nonstarter.”

At the end of the last round, officials pushed back their goal of wrapping up negotiations in December to March 2018. Officials hope the extra time will give negotiators more room to work on proposals between rounds to keep talks on track. This is a promising sign that negotiators are not throwing in the towel.

The next round of talks, set to begin on Nov. 17 in Mexico, will be especially important as officials tackle the contentious dairy proposals.

As your voice in Washington, D.C., DBMMC has consistently been engaged throughout this process to make sure our officials know NAFTA’s importance to dairy. The cooperative has met with representatives from USTR and USDA as well as many representatives and senators on your behalf to discuss how U.S. trade policies affect our dairy farmers. We also remain involved as part of the North American Working Group of the U.S. Food & Agriculture Dialogue for Trade, which is a board coalition representing all of agriculture.

We will continue to work diligently on your behalf to obtain a positive outcome in these negotiations.

If you have any questions or concerns, please contact Aaron at (608) 482-2438 or astauffacher@dbmmc.com.