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Japan trade agreement is dairy industry priority

USDA Japan and US flags
Optimism rises for agriculture-only trade deal with Japan now that its national elections are completed.

The continued success of the U.S. dairy industry relies on stable export opportunities to markets abroad, and Japan represents a major opportunity to expand growth. In an effort organized by the National Milk Producers Federation and the U.S. Dairy Export Council, 70 dairy companies, farmer-owned cooperatives and associations sent a letter Monday to the U.S. Trade Representative ambassador and the U.S. secretary of agriculture asking the U.S. government to capitalize on the conclusion of Japan’s national elections and quickly finalize a strong trade deal with Japan in order to secure critical market access for the domestic dairy industry.

The U.S. exported $270 million in dairy products to Japan in 2018, and there is room for further growth. However, without a strong U.S.-Japan trade agreement, half of U.S. dairy sales to Japan will be wrested by competitors, mounting to a toll of $5.4 billion in lost export sales when Japan’s trade deal with the European Union and the Comprehensive & Progressive Agreement for Trans- Pacific Partnership (CPTPP) are fully phased in, the industries noted in a joint press release.

“With the recent conclusion of Japan’s national elections, the next several months will be critical, and on behalf of America’s dairy industry, we urge the USTR to move quickly to secure an agreement that builds upon the best dairy components of the CPTPP and Japan-EU agreements. Without that, our industry stands to lose $1.3 billion in exports over a decade, costing dairy farmers $1.7 billion in farm income,” the letter stated.

Michael Dykes, president and chief executive officer of the International Dairy Foods Assn., said a potential deal with Japan is a double-edged sword, with considerable upside possible if it creates improved market access and a level playing field. However, if nothing happens, U.S. dairy exports will fall and lose the access that currently exists.

The Japan-EU agreement and CPTPP have allowed the EU, New Zealand and Australia to position themselves to seize sales from the U.S. dairy industry. Swift negotiation of a trade deal with Japan that builds on the best components of the Japan-EU agreement and CPTPP is urgently necessary for America’s dairy farmers and processors, signers of the letter noted.

Dykes added that he’s optimistic that an agriculture-only deal could be reached with Japan yet this fall. If accomplished in this fashion, it would not require congressional approval. He said he believes Japan prefers U.S. dairy products, but with the tariff rate reductions anticipated with CPTPP countries as well as the EU, it may be too expensive for Japan to continue buying U.S. dairy products.

“Eroding dairy competitiveness in Japan is at a critical point. The time to re-level the tariff and access playing field is right now,” Darigold president and CEO Stan Ryan said. “Today, Darigold supplies over 50% of the U.S. American-style cheese exports to Japan. Those sales will soon be lost as competitor trade deals take effect.”

Sue Taylor, vice president of dairy policy and procurement for Leprino Foods Co., said the company invested heavily in developing lactose and whey protein exports to this important market several decades ago and, more recently, mozzarella exports and believes the market has significant further growth potential. “We risk losing these sales and growth opportunities to competitors who recently finalized preferential trade agreements unless the U.S. negotiates a strong agreement,” Taylor said.

The letter noted that any negotiated agreement must combat the EU’s efforts to “monopolize the use of common name products through the misuse of geographical indications.” The dairy groups asked USTR to build further upon the side letter precedents it negotiated in the U.S.-Mexico-Canada Agreement. “Protecting the use of common names, particularly the use of generic cheese names, is a high priority in order to ensure that U.S. dairy products can continue to be sold unrestricted in markets across the globe,” the letter said.

Wilf Costello, chief commercial officer for global cheese with Glanbia Nutritionals, said the Japanese market offers the opportunity to grow exports. “We are at an important juncture where our competitors have secured preferential trading terms that are impacting U.S. dairy ambitions. To ensure we can deliver on the opportunity in Japan, we need our trade negotiators to quickly finalize a trade agreement that secures access for American dairy products and ample room to grow,” he said.

TAGS: Policy Dairy
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