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WCMA Notes: With Much at Stake, the Time for Trade Deals is Now

A Column Offered by WCMA Communications, Education, and Policy Director Rebekah Sweeney

For years, the only connection between cheese and steel would have been at the vat.  Now, a global trade war has linked them in a way that threatens the stability and long-term growth of the U.S. dairy industry.

In May, the Trump Administration imposed steep tariffs on steel and aluminum from Canada, Mexico, China, and the European Union.  Since then, the U.S. has escalated the dispute with 25 percent tariffs on Chinese imports worth $50 billion.

Unsurprisingly, trading partners have retaliated with levies on more than $80 billion in U.S. exports, including cheese and other dairy products.

While public opinion – and even opinion within our industry – is mixed on the President’s actions, it is clear there is much to lose.

U.S. dairy exports have been a bright spot for a domestic dairy industry saddled with strong supply and stagnant dairy prices, declining domestic fluid milk consumption, and vexing labor shortages.  Since 1995, the sale of U.S. dairy products overseas increased a whopping 604 percent, with nearly 15 percent of all milk produced in the United States in 2017 marketed internationally.

China and Mexico are particularly valuable customers.

Demand for dairy in China has grown immensely as consumers there are developing a taste for cheese.  Since 2016, sales of U.S. dairy products in China jumped 49 percent to a total of $577 million, and, with a population four times that of our own country, the U.S. Dairy Export Council expects China to soon become the world’s top cheese importer.  Without a break in tariff tensions, the U.S. stands to lose ground to New Zealand and the European Union in this key market.

Today, Mexico holds the title as the U.S. dairy industry’s best customer: the volume and value of our dairy products sent to Mexico tripled in the past decade.  In 2017, total sales came to $1.3 billion. To maintain a market foothold, cheese manufacturers like Sartori Company have absorbed at least some of the cost of increased tariffs with their distributors, but warn these arrangements are unsustainable.

Exporters are immediately facing the impact of our ongoing trade conflict, and a decline in sales abroad can have the effect of saturating the domestic marketplace, lowering dairy futures and cash market prices.

With so much at stake, the conclusion of trade negotiations and a return to free and open trade, particularly with Mexico, is in the U.S. dairy industry’s best interest.

A deal with China seems distant, though there’s been headway in negotiations with Mexico. At August’s end, many sighed with relief over breaking news that the United States and Mexico had come to terms.  The U.S. Trade Representative boasted a return to zero tariffs on agricultural products and unrestricted access in Mexico to cheeses labeled with certain common names.

But the final word for dairy is less clear. The International Dairy Foods Association, with its strong advocacy presence in Washington, D.C., reports that Mexican tariffs on cheese from the U.S. will remain as our nation’s tariffs on Mexican steel and aluminum imports continue. And no list of common cheese names for our cheesemakers to use in Mexico has emerged.

Let’s hope that, as deals are hammered out, an unwarranted connection between cheese and steel is severed, and free trade opportunities be made available to all in the U.S. dairy industry.

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