Home TPP Trade Topics A-I South East Dairy Farmers Asosciation Submission to US Hearings
South East Dairy Farmers Asosciation Submission to US Hearings PDF Print E-mail
South East Dairy Farmers Association
1531 T St. NW, Washington, D.C.  20009           Phone 202-234-6888  Fax 202-234-6887

March 10, 2009

Office of the U.S. Trade Representative
600 17th St. NW
Washington, D.C.  20508

Re:  Docket No. USTR-2009-0002

Dear Sir:

The following comments are submitted on behalf of the following Member Organizations of South East Dairy Farmers Association, some of which may submit additional comments on their own: Arkansas Dairy Cooperative Association, Damascus, AR; Cooperative Milk Producers Association, Blackstone, VA; Dairymen’s Marketing Cooperative, Inc., Mountain Grove, MO; Lone Star Milk Producers, Inc., Windthorst, TX; Maryland and Virginia Milk Producers Cooperative Association, Inc., Reston, VA; and Piedmont Milk Sales, LLC., Blountville, TN.

The dairy producer members and patrons of these organizations face unique challenges in the U.S. dairy industry.  It is primarily a fluid milk market where accessing adequate supplies for customers and balancing the market between daily variations in supply and demand are key.  Manufacturing is minimal in the region so the potential to benefit from developing export markets is very limited.  Still, these organizations have a history of supporting fair and balanced international trade agreements because of the global nature of the U.S. dairy industry.

The potential inclusion of New Zealand in a U.S. – Trans-Pacific Partnership (TPP) FTA, however, would create an irresolvable imbalance in dairy trade between our two countries.  We respectfully request that dairy trade be excluded from this or any FTA between our country and New Zealand.

The organizations listed above are the backbone of the U.S. dairy industry in the southeast.  That industry not only provides a fresh, wholesome and nutritious staple to the public, it is a significant economic engine in the region.  And the dairy farmers themselves provide jobs and the farmers help maintain green space in the rapidly growing region.

The industry in the southeast has introduced several initiatives recently to help grow production in the region.  Milk prices must be adequate to help make that happen.  Allowing open access to the U.S. market to a country that must export more than 90% of its annual production will have several effects on our market and lower prices would surely be the first.

On the surface that might appear to be of help to the southeast where finding supplemental milk and transporting it to our plants at a reasonable cost is a daily challenge.  We are sure, however, that any benefit would be short-lived and the aftermath far worse than the current situation.  Dramatically lower U.S. prices caused by an influx of manufactured dairy products from the dominant dairy exporter in the world would cause a contraction in U.S. milk supplies.  With the U.S. manufacturing capacity likely unchanged our challenge to purchase supplemental milk would become more difficult and relatively more expensive.

We have, in the past, worked closely with National Milk Producers Federation to examine every FTA proposed by our government on an individual basis.  In fact, we have been able to support several of them and have made that support known to the Congressional delegations from states in the region.  We have, for instance, supported FTA’s with Chile, Singapore, Peru, CAFTA-DR, Bahrain, Morocco, Oman, Colombia, Panama and South Korea.

The factor involved in each of these FTA’s is the balance that gives the U.S. dairy industry the opportunity to compete to expand international markets for our products.  There can be no possibility of achieving that balance with a country with such a small market with the need to export the vast majority of its own dairy production.

After making it clear that our organization will be supportive when a balanced agreement offers us a chance to build markets for U.S. dairy, it is important to note that there are several instances where exceptional circumstances demanded a unique response.  A short list of examples would include: The U.S. imposed safeguards on imported steel in 2002 because of distortion in international markets for steel at the time.  Sugar was excluded from the FTA with Australia.

The proposed TPP FTA includes several countries with which we already have an FTA.  In addition, it would facilitate trade for two dairy export competitors with countries with which they have no current formal trade agreements.  There is also the opportunity for New Zealand to develop those countries as virtual launching pads for sending their dairy products into the U.S. market unless Rules of Origin are carefully and effectively negotiated.  Facilitating dairy trade for competitors in markets in which we’re making gains is another example of why including New Zealand dairy makes this agreement unfair and out of balance.

Our specific concerns about the inclusion of New Zealand dairy in the TPP FTA include the fact that dairy products from the country are marketed by what is essentially a monopoly.  While the former New Zealand state trading enterprise no longer exists, the successor company markets over 90% of the products from a country with such a small domestic market that it must export 90% of what it produces.  The need for that company to be, and remain, the dominant player in international dairy trade is enormous.

Without an FTA in place, New Zealand currently enjoys a greater than 100 to 1 advantage in dairy exports to the U.S. over U.S. dairy sales there.  Over the past five years, New Zealand sells on average $619 million in dairy products each year in the U.S. while our sales there average just $5 million annually.  We concur with National Milk Producers Federation estimates that predict gross revenues to U.S. dairy producers would drop a cumulative $20 billion over the first 10 years of such an agreement.

Finally, we have specific concerns about the potential impact on the economic safety net programs passed by the U.S. Congress less than one year ago.  Purchases by the Dairy Product Price Support Program (DPPSP) would likely increase dramatically as the U.S. taxpayer becomes effectively the customer of last resort worldwide and outlays under the Milk Income Loss Contract (MILC) Program would increase as U.S. milk prices decline.

The many factors stated in these comments lead us to the only possible conclusion that dairy trade with New Zealand must be excluded from the TPP.  We fully recognize the gravity of that request but believe it is the only way to avoid devastating economic consequences for U.S. dairy producers and a resulting decline in the dairy industry here that would be a disservice to U.S. consumers.  Thank you for the opportunity to share these concerns with you.

Sincerely,



Charles Garrison
Executive Director
 

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