America risks losing up to US$5.4bn in dairy export business without swift action to deliver a strong trade agreement with one of the world’s largest dairy buyers, 70 dairy companies and associations told the United States Trade Representative, Robert Lighthizer, and the agriculture secretary, Sonny Perdue, in a letter this week.
The effort, organized by the National Milk Producers Federation and the US Dairy Export Council (USDEC), called on the government to quickly finalize a deal that will capitalize on the conclusion of Japan’s national elections last month.
Japan is the world’s biggest cheese importer and a significant buyer of whey, lactose and other dairy products. Forecasts suggest Japanese dairy imports will continue to grow in the years ahead, due to rising consumption there and constraints on the nation’s domestic dairy farming sector.
Advantage to others
However, America’s ability to win a larger share of Japan’s export demand, or even maintain its current level of dairy business, is in jeopardy due to recent Japanese trade agreements with the US’ rivals, exporters believe.
Through preferential market access provisions in the EU-Japan Economic Partnership Agreement, and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the European Union, New Zealand and Australia have undoubtedly gained a significant advantage in market access.
An analysis compiled earlier this year by Meros Consulting for USDEC shows that the CPTPP and the EU partnerships will put the US at a significant disadvantage against other dairy suppliers, and the US will lose critical market share, if it remains without a comparable agreement with Japan.
A tipping point will come by 2022 at the latest, the analysis reveals, when the US will start to feel significant impact from the deals. By then, American dairy exports to Japan could have fallen by as much as US$185m since 2018, US$1.3bn within 10 years and US$5.4bn by 2038.
The cheese segment will account for 44% of the overall impact, while the bigger ingredients segment, which includes lactose, food whey and whey protein will feel the impact more quickly, the Meros report said.
“Given that Japan is an established market with a growing demand for dairy products, the successful negotiation of a robust trade agreement with Japan will bring a much-needed boost to the economic health of the US dairy industry and set our industry up on a path to compete effectively there moving forward,” the group wrote to the government.
“Securing robust dairy export opportunities into this overseas market will be critical to restoring confidence for our dairy farmers and processors across the country.”
Swift negotiation of a trade deal with Japan that builds upon the best components of the Japan-EU agreement and the CPTPP is urgently necessary for America’s dairy farmers and processors, they added.
Protecting 'common' names
Any negotiated agreement must “combat the EU’s efforts to monopolize" the use of common name products through the misuse of geographical indications, they demanded.
Protecting the use of common names, particularly generic cheese names, is one of the industry’s highest priorities so that their dairy products can continue to be sold unrestricted in markets across the globe.
“To that end, we urge [Lighthizer] to build further upon the side-letter precedents it so successfully initiated under the US-Mexico-Canada Agreement in order to lock in market access assurances for the export access ultimately secured with Japan,” they wrote.
The US exported US$270m-worth of dairy to Japan last year, though analysts believe there is room for further growth. However, without a strong trade agreement with Japan, the industry worries that “half of US dairy sales to Japan will be wrested by competitors, amounting to a toll of US$5.4bn in lost export sales,” once Japan’s deals with the EU and CPTPP are fully phased in.
Dairy industry figures have been effusive in stressing Japan’s importance among American dairy exporters.
“Eroding dairy competitiveness in Japan is at a critical point. The time to re-level the tariff and access playing field is right now,” said Stan Ryan, president and chief executive of Darigold.
“Today Darigold supplies over 50% of US 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 says her company began invested heavily in developing lactose, whey protein and mozzarella exports to Japan over several decades. She believes that 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 US negotiates a strong agreement,” she said.
“We are very supportive of the administration’s efforts to secure an agreement that allows us to retain and grow this important market.”
Glanbia Nutritionals, meanwhile, acknowledges Japan as an important export market with further growth on the horizon. But only with a trade deal in place.
“We are at an important juncture where our competitors have secure preferential trading terms that are impacting US dairy ambitions,” said Wilf Costello, the company’s chief commercial officer for global cheese.
“To ensure we can deliver on the opportunity in Japan, we need our trade negotiators to quickly finalize an agreement that secures access for American dairy products and ample room to grow.”
It was announced this week that top Japanese and American negotiators will meet soon in Washington in what would be a last-minute attempt to compromise on agriculture and automobile exports if they were to conclude a trade deal by September.
Toshimitsu Motegi, Japan's minister in charge of the talks, and Lighthizer hope to move the stalled negotiations forward over two days of sessions.
Japan requires parliamentary approval to put any trade pact into effect. To present the deal for approval to an extraordinary session of its parliament in October, Tokyo would need to complete a new deal with Washington by September.
If it does so, the trade agreement can take effect this year. However, missing this opportunity would require a further wait until the next regular parliamentary session begins next year.
The dairy firms told Representative Lighthizer: “It is our hope that the US will seize this opportunity presented by the conclusion of Japan’s election.
“We have full confidence that you and your negotiating teams will deliver a trade agreement that secures the type of new market opportunities in Japan that we need to be fully competitive there and brings home robust benefits for America’s dairy farmers and processors.”