Dairy leader calls for fair NAFTA deal with Canada, while preserving Mexico market access

19 Jul 2017 --- The Grocery Manufacturers Association (GMA) has welcomed the Trump Administration’s recently released objectives for modernizing the North American Free Trade Agreement (NAFTA), calling for a level playing field for the US.

“The Administration's key negotiating objectives include the essential elements to maintain and expand tariff-free trade and set fair rules that level the playing field for US consumer product manufacturers,” said Pamela G. Bailey, GMA’s president and CEO.
“It is essential that the millions of men and women who work to produce the quality products enjoyed by consumers here at home and around the world be at the forefront of the negotiations to strengthen and improve this landmark trade agreement.”

The US processed food and beverage exports to the world totaled almost US$40 billion in 2016, roughly a third of all US agricultural exports. Of those processed product exports, approximately US$17.6 billion (just under half) were destined for Canada and Mexico – America’s top two export markets.

Meanwhile, the CEO of a major farmer-owned dairy cooperative in Washington state has praised the North American Free Trade Agreement (NAFTA) for creating jobs and increasing sales and is urging that a renegotiated treaty must maintain market access to Mexico, while also fixing trade challenges with Canada. 

Speaking at a congressional panel recently, president and CEO of the American dairy agricultural marketing cooperative, Darigold, Stan Ryan, hailed the good work of NAFTA. 

“An agreement that has done this much good and that supports more than 25,000 in the dairy sector alone must be preserved,” he said Stan Ryan.

Darigold is the third-largest privately held business in Washington state, with total annual sales of US$2.1 billion in fiscal year 2017. Darigold markets 40 percent of its milk products outside the US. The cooperative is a member of both the National Milk Producers Federation (NMPF) and the US Dairy Export Council (USDEC).

On Tuesday, Ryan told members of the House Ways and Means Subcommittee on Trade that Darigold and other US dairy companies have benefited from NAFTA through “stronger demand for their milk than would otherwise be the case. It is critical that this progress not be reversed and that our fully open access to the Mexican market remain in place.” 

“NAFTA has been a driving force behind remarkable growth in dairy exports and is the reason the United States’ share today of Mexico’s dairy imports is 73 percent,” Ryan said, adding that US dairy sales to Mexico have risen to US$1.2 billion in 2016 from just US$124 million in 1995. 

Ryan noted that the preferential tariffs enjoyed by the US could be undermined if the dairy-specific benefits of NAFTA are watered down in a revised pact. He also said Mexico is currently negotiating a trade agreement with the European Union and exploring possible agreements with New Zealand and Australia, all of which are significant to dairy exporters with an interest in expanded sales to North America.

NAFTA is “the vehicle the US will need to ensure that we remain competitive in that market, should Mexico decide to use its ongoing trade discussions with major dairy exporting nations to open up new inroads to its market,” Ryan added.

His testimony also focused on the lack of US dairy access to Canada included in NAFTA, a holdover from when the agreement was negotiated in the early 1990s, as well as subsequent challenges that have resulted from Canadian policies designed to distort trade.

“NAFTA modernization discussions are an unmissable opportunity to address just that type of unfinished business in order to truly open up the North American market and put our dairy exports to Canada on par with the vast majority of the rest of the US economy,” says Ryan.

Canada’s National Ingredient Strategy contravenes the spirit of Canada’s World Trade Organization and NAFTA trade commitments, Ryan said, adding that the new Class 7 pricing strategy allows Canada to sell milk powders at prices intended to undercut competing products from other nations, even though domestically Canada has one of the world’s highest raw milk prices. 

“If Canada wishes to retain a government-run system of micro-managing its milk supply, that is its prerogative, but that does not give it the right to use the high returns from that system to disrupt with indirect subsidies the commercial dairy markets on which Darigold and countless other good-faith competitors in the US and elsewhere rely,” he notes.