Mixed Reviews For Free Trade Agreement

By Ron Johnson, Dairy Editor
Friday, February 20, 2004 10:29 AM CST

Mixed reviews are being offered on the impact of the recently signed free trade agreement between the U.S. and Australia.

The Dairy Trade Coalition (DTC) says the agreement reflects a "moderate approach." Meanwhile, the National Milk Producers Federation (NMPF) says "severe damage" to U.S. dairying has been avoided. And Rep. Dave Obey (D-WI) notes that the pact assures "more dairy imports."

DTC: 'Moderate approach'

The U.S.-Australia Free Trade Agreement (FTA) follows key recommendations of the DTC, according to executive director Mario Castillo. Castillo said preliminary U.S. and Australian government reports indicate that the dairy section of the new trade pact reflects major recommendations made by the DTC in a Jan. 23 letter to Secretary of Agriculture Ann Veneman and U.S. Trade Representative Robert Zoellick. The letter was signed by the Alaska Dairy Producers Association; Women Involved In Farm Economics; Pedrozo Dairy & Cheese Company; and Gary Tauchen, Tauchen Harmony Valley.

"In contrast to other groups, the DTC offered very specific recommendations to minimize the FTA's impact on dairy farmers. For nearly a year, the DTC has been consulting with U.S. trade officials on a negotiating approach that would help America's dairy producers make a more manageable transition to free trade by minimizing the impact of additional dairy imports from Australia. The DTC proposed a negotiating framework that recognized the political and economic realities of the day while mitigating any potential loss of U.S. dairy producer income," said Castillo.

"The DTC negotiating recommendations to USDA and USTR did not make any specific recommendations as to the dairy product amounts or types that were to be negotiated as part of the FTA. The DTC believes that the specific product types and amounts to be allowed greater access into the U.S. market should be determined by U.S. Government negotiators with the advice and consent of grassroots dairy producer organizations," Castillo continued.

"Our negotiators apparently recognized that dairy is import-sensitive. There will be no change in the basic U.S. tariff rate quota system and overquota tariffs on dairy products. We understand from U.S. Government and news media sources that dairy imports from Australia will increase to about 0.17 percent of the annual value of U.S. dairy production, and about 2 percent of the current value of total U.S. dairy imports. We are in the process of obtaining and analyzing final details of the agreement," he said.

Castillo said government officials have told the DTC that the Commodity Credit Corporation's (CCC's) dairy price support program will not be affected.

"We appreciate the fact that the DTC's recommendations were instrumental in shaping the final Australian FTA," said Castillo. "The DTC's framework for negotiations was a practical approach to the FTA that satisfied our trade commitments to Australia while protecting the economic health of the American family dairy farmer."

Severe damage avoided

Meanwhile, the National Milk Producers Federation (NMPF) says the newly created free trade agreement with Australia preserves most of America's existing dairy tariff structure, which represents a major accomplishment in light of extreme pressure by the Australians to completely open America's market to "a flood of imports." However, the agreement does allow additional access to the U.S. market for Australian exports, although the economic impact of that concession is unknown.

"Our best hopes were not realized through the negotiations, but neither were our worst fears," said Jerry Kozak, president and CEO of the NMPF. "We did achieve an important goal, which was no reduction in U.S. high-tier, above-quota tariffs," he said, adding that the economic implications of the additional access granted to Australia are "still to be determined."

According to a fact sheet prepared by the U.S. Trade Representative's office, there will be no change in the U.S. above-quota tariff on dairy products subject to quotas, such as butter, cheese and skim milk powder. Increases in imports from Australia under the FTA tariff rate quotas will amount to about 0.17 percent of the annual value of U.S. dairy production, according to USTR estimates, which represents about 2 percent of the current value of total U.S. dairy imports.

The NMPF's economic and trade policy staff will review the details of the agreement to verify what the overall impact on U.S. producers will be. The NMPF had forecast that if Australia was successful in pushing for the elimination of all U.S. dairy tariffs, 150,000 farm-related jobs, including one-quarter of America's 70,000 dairy farmers, would be jeopardized by the FTA.

"The outcome of this agreement, as best we can determine right now, is neither great nor awful, but somewhere in between," Kozak said. "We still need to calculate the true impact of the proposal in order to determine our response once Congress gets the chance to approve the agreement."

The role dairy farmers and their cooperatives played in communicating their concerns to their elected officials "was crucial in preventing Australia's government from negotiating much greater inroads into our markets," he said. "We easily could have been steamrolled if we had not been very vocal about the dire economic and political consequences of a really bad deal for dairy farmers in this country."

More imports

Congressman Dave Obey says the announcement of the latest bilateral free trade agreement by the Bush Administration means the threat to the U.S. dairy industry from low-priced imports will continue to grow.

Even though the agreement retains the current overquota tariffs, it still opens the door to more dairy imports from Australia, the world's largest exporter of nonfat dry milk and one of the major exporters to the U.S. of milk protein concentrate, said Obey.

According to the U.S. trade representative, the agreement will allow initial increases in dairy imports from Australia that amount to 0.17 percent of the annual value of U.S. dairy production, and about 2 percent of the current value of U.S. dairy imports.

"Based upon the little information we have so far, this agreement means that Australian dairy imports might grow from 100 to 300 million pounds per year, displacing an equivalent amount of domestic milk production and possibly forcing as many as 200 family sized Wisconsin farmers out of business. And that poundage represents only the initial increase. Presumably, more is on the way," Obey said.

Obey claimed that U.S. negotiators should not have allowed any additional dairy imports from Australia without first tackling MPC. He is the lead sponsor with Congressman Don Sherwood (R-Pennsylvania) of legislation in the House of Representatives to ensure that MPC imports are treated like similar dairy products. That legislation, which has more than 170 cosponsors, is in the House Ways and Means Committee.

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