The U.S. dairy industry, which supports more than 3 million jobs in the United States and pumps almost $620 billion into the U.S. economy, relies on trade agreements to open new markets and increase exports. After being a net importer of dairy products a decade ago, the United States now claims a dairy trade surplus of $2.7 billion and sends American dairy products to 146 countries. U.S. dairy exports nearly tripled since the early 2000s, and the United States became the world’s third-largest dairy product exporter behind New Zealand and the European Union (EU). Today, approximately one day’s worth of milk produced each week is exported, or roughly 15% of all production. As U.S. milk production continues to increase over the next decade, new trade agreements will become even more vital to ensure the global competitiveness of the industry and to boost the American economy.
IDFA advocates for the protection of existing trade agreements and the development of new trade agreements in order to ensure U.S. dairy products are globally competitive. IDFA recognizes the U.S. dairy industry’s needs for equitable and transparent agreements that provide certainty, create preferential access, open markets and eliminate barriers. IDFA advocates for these things by collaborating with the Administration to ensure their consideration of U.S. dairy priorities in all trade negotiations, to provide innovative feedback on dairy trade policy priorities, and by ensuring Congress understands the importance of these agreements to U.S. dairy and the American economy.
Mexico and Canada purchase roughly $2.2 billion in U.S. dairy products annually, representing 37% of U.S. dairy exports. Mexico is our largest dairy export market, accounting for over $1.5 billion in U.S. dairy exports in 2019. The top exports were milk powder, at $779.1 million, and cheese, at $419.4 million. Canada is a close second, accounting for $667.3 million in 2019.
On July 1, 2020, the U.S.-Mexico-Canada Agreement (USMCA) entered into force and was intended to preserve duty-free market access to Mexico, strengthen sanitary measures, eliminate Canada’s unfair pricing policies, and increase access to the Canadian market. Although IDFA has concerns that not all aspects of USMCA are resulting in the access estimated by the U.S. International Trade Commission’s analysis from 2019, IDFA remains supportive of the Administration’s efforts to implement and enforce USMCA.
In January 2020, China and the United States signed an Economic and Trade Agreement, also known as “Phase One”. In addition to purchases of U.S. agricultural products, the deal includes commitments by the Chinese to reduce non-tariff barriers affecting all dairy exports to China, including infant formula, dairy permeate powder, and extended shelf-life milk—an important concession achieved by the U.S. administration.
IDFA will continue to encourage the U.S. government and China to ease tariffs impacting dairy products, maintain the important concessions achieved in Phase One, begin negotiations on a phase two deal that removes all existing tariffs and non-tariff barriers and creates a level playing field for U.S. dairy products.
China represents a significant market opportunity for U.S. dairy, and it is essential to our producers and companies that we have a trade relationship with China that further levels the playing field for American dairy and provides expanded market access for our growing industry.
Japan is the fifth-largest market for U.S. dairy products, accounting for almost $300 million in exports in 2020. It’s also the second-largest net importer of cheese in the world, importing nearly $1.3 billion in cheese in 2019. The country’s demand for dairy is either sustaining or growing annually, and its domestic production can’t keep up, but most imports are subject to high tariffs and tariff-rate quotas (TRQs). American dairy companies need increased market access to meet the growing demand from Japanese consumers.
On October 7, 2019, the U.S. Trade Representative and the Ambassador of Japan to the United States signed the U.S.-Japan Trade Agreement. Although not perfect, the pact will provide a more level playing field for U.S. dairy by reducing significant tariffs. For instance, under the agreement, Japan will eliminate the majority of its cheese tariffs, including the highest cheese tariffs that previously were set at 40%, in 15 years, with whey duties eliminated in 5 to 20 years, depending on the type. A transitional country-specific quota for the United States (CSQ) will be established for whey products, and U.S. processed cheese will have a permanent CSQ. Japan also immediately eliminated its 8.5% tariffs on lactose and lactose syrup and its 2.9% tariff on milk albumin, which includes whey proteins, and established a new 750-metric-ton global tender within its World Trade Organization (WTO) tariff-rate quota for milk powder with a protein content of 35% or higher.
IDFA continues to advocate for the Administration to enter into full and comprehensive negotiations with Japan on a Phase Two agreement that stimulates the competitiveness of U.S. dairy products in Japan and expands upon the commitments made in Phase One.
For information about existing free trade agreements, please visit: https://ustr.gov/trade-agreements/free-trade-agreements.
For more information on other recent trade agreements, please visit:
For more information on ongoing trade negotiations, please visit:
For the latest trade analysis and articles published by IDFA, please visit our newsroom: https://www.idfa.org/latest?date_range=&issue=184&category=0.
For any other trade-related questions or to become a member of the IDFA International Trade Committee, contact Becky Rasdall, IDFA Vice President of Trade Policy and International Affairs at email@example.com.