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Increased NZ-US dairy trade would be ‘damaging’ to US sector without reforms - farming coalition

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By Mark Astley+

26-Mar-2013

Increased NZ-US dairy trade would be ‘damaging’ to US sector

Increasing Fonterra-dominated New Zealand’s access to the US dairy sector through on-going Trans-Pacific Partnership (TPP) Free Trade talks would be “damaging” to producers and processors in the country, a coalition of farmer organisations has claimed.

In a letter to the US Senate Finance Committee earlier this month, a coalition of 11 rural organisations claimed that Fonterra’s “monopolistic” market presence has the potential to seriously damage American livelihoods.

Fonterra currently acquires and processes around 90% of the raw milk produced by New Zealand’s dairy farmers. According to the coalition, the US cannot compete with “dairy imports produced under unfair conditions.”

“New market access for New Zealand’s monopolistic dairy sector would be especially damaging to US dairy farmers and those who produce and process non-fat dry milk, butterfat or cheese,” said the 4 March-dated letter.

"The nation simply cannot afford to compete with dairy imports produced under unfair conditions. It is critical that Congress provide clear direction and oversight regarding expectations for US negotiators in order to avoid serious disruptions to agricultural sector livelihoods,” the letter added.

“Tremendous advantage in global markets”

Also this month, a group of more than 30 US Senators issued an almost identical call in a letter to US Secretary of Agriculture, Tom Vilsack, and US Trade Representative, Ron Kirk.

The Senators raised concerns about the impact an expansion of US-New Zealand dairy trade would have “if reforms are not undertaken by New Zealand.”

“New Zealand has consistently expressed interest in greater access for its dairy products to enter the US market. At the same time, it is our understanding that New Zealand has resisted considering significant reforms to its dairy sector policies, which permit the concentration of virtually 90% of its milk supply into the hands of one company,” said the letter.

“Dairy producers and processors in our states are deeply concerned that this market concentration provides New Zealand, the world’s largest dairy exporter, with a tremendous advantage in global markets and are insistent on seeing it effectively addressed as a necessary precursor to any expansion of US-New Zealand dairy trade in TPP.”

Japan interest increased “commercial significance”

Meanwhile, the US Dairy Export Council (USDEC), the National Milk Producers Federation (NMPF) and the International Dairy Foods Association (IDFA) have welcomed a recent declaration of interest from Japan to join the TPP Free Trade talks.

“The addition of Japan greatly expands the scope of the TPP, and that market is a significant opportunity for US dairy exports,” said IDFA senior group vice president, Clay Hough.

US Dairy Export Council (USDEC) president, Tom Suber added that the addition of Japan would “dramatically increase the commercial significance of the talks.”

“The US dairy industry sees real value in the TPP negotiations if we are able to open new markets, like Japan and Canada, use the TPP process to strengthen global trading rules and secure meaningful competition policy changes in New Zealand’s dairy sector,” said Suber.

2 comments (Comments are now closed)

US reaction ridiculous but predictable

The US dairy industry is supported by unfair government subsidies. Fonterra operates with no subsidies whatsoever as these were abolished decades ago.
Fonterra's 90% milk supply is contestable by any company that wants to set up in NZ, and this is indeed happening. Furthermore, NZ law requires Fonterra to help its competitors by supplying them with milk at a regulated price (cost of production).
NZ produces low-cost milk because the year-round temperate climate enables growth of cheap grass.
How the US dairy industry can twist the truth so much and get away with it is hard to believe! The truth is that meaningful change to the unfair, trade-distorting US dairy subsidies is required to enable fair competition.

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Posted by Jonathon Reid
26 March 2013 | 22h272013-03-26T22:27:38Z

U.S. can't compete with NZ?

Before commenting on the unfair advantage people should look to DFA's presence in the U.S. In addition NZ is smaller that the state of Texas. How is it possible that NZ has an unfair advantage?!!??! We may want to look to NZ's innovation in the dairy sector rather than blaming the monopolistic nature.

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Posted by DSmith
26 March 2013 | 16h062013-03-26T16:06:49Z

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