Now that Congress has approved Trade Promotion Authority, negotiators from 12 nations have begun final deliberations on the Trans-Pacific Partnership (TPP). Those final talks will ultimately determine whether the U.S. dairy sector will get a "fair shake" at the trade table. One possibility is that Canada and Japan will continue to employ high tariffs and other protectionist measures to shelter major portions of their dairy markets while top dairy trader New Zealand gets unabated access to our markets. That scenario would have devastating effects on U.S. dairy markets.
Among the negotiation table hang-ups, agriculture takes center stage with dairy being the lead act. The U.S. and Japan represent the two largest economies, and the duo reportedly narrowed their differences on two sticking points - automobiles and agriculture. For dairy, Japan's high tariffs on butter and powder are the chief areas of concern.
While our editorial team has long supported Canada's dairy supply management system, our neighbor cannot have it both ways - greater access to U.S. consumers while still closing its doors to ag imports. To that end, we were pleased that 21 U.S. House members sent a letter to the Canadian Ambassador reinforcing that point. The letter said, "The final dairy market access package with Canada will have a significant impact on how Congress views the final agreement. It will be difficult for us to support Canada's inclusion in TPP if significant new dairy access is not part of the deal."
New Zealand presents an entirely different challenge. As the world's leading dairy exporter, the Kiwis want dairy-related tariffs lifted in the U.S. as part of a TPP deal. That presents a quandary. If the U.S. grants New Zealand unlimited access to our markets without the ability to move products to Canada and Japan, our demand-supply balance will be squeezed on both sides, quashing our momentum on dairy exports.
Twenty-one years after the North American Free Trade Agreement (NAFTA) was signed between the U.S., Canada and Mexico, we are still wrestling with agricultural trade issues kicked aside to get that deal done. This time around, our trade negotiation position should be, if the Canadians will not adjust their stance on ag trade, then the remaining 11 TPP countries should move on without them. Trade actually has to be free and fair. In the case of TPP, that's a big deal as this potential trade bloc accounts for two-fifths of the world's gross domestic product.