The North American Free Trade Agreement (NAFTA) is undisputedly the U.S. dairy industry's most important trade deal, Tom Vilsack, U.S. Dairy Export Council president and CEO, told a House Agriculture Committee today in Washington, D.C. It can and should be improved, particularly regarding Canada, but any attempt to modernize the agreement must preserve the preferential market access it brought to the U.S. dairy sector in Mexico.
Preserving and expanding NAFTA is a critical component of the U.S. response to dairy export competition, Vilsack said. The European Union (EU) is actively working to establish a trade deal with Mexico, while New Zealand and Australia are pushing to implement a "Trans-Pacific Partnership light" with eight other countries including Mexico.
Trade agreements have been instrumental in U.S. dairy export growth and the subsequent benefits that growth has delivered to the U.S. economy. The increase in U.S. dairy exports since 2004 lifted farmers' milk prices by an average of $1.25 per hundredweight, adding roughly $36 billion to farm milk sales over that period.
Last year, U.S. suppliers shipped $1.2 billion in dairy products to Mexico, up from $124 million in 1995.
"Preserving those sales is essential not only to American dairy farmers, but also to the workers in companies supplying inputs and services, and downstream processing plant jobs across this country," Vilsack said.
U.S. dairy exports support up to 100,000 jobs, covering every state in the union, from farmers to processors to distribution and shipping businesses. U.S. dairy exports to Mexico are responsible for about one-quarter of those 100,000 jobs.
Vilsack reiterated the call to use the modernization effort to address a number of key NAFTA issues, including omissions from the original deal, such as Canadian dairy tariffs, as well as Canada's latest attempt to use policy tools to distort trade: the class 6 and 7 pricing schemes.
Vilsack said it would be hard to find success in any modernization of NAFTA without resolving the Canadian issues.
Taking an even broader view, the competitive benefits NAFTA delivers must be also duplicated in other key nations, Vilsack said. The EU, New Zealand and Australia are actively negotiating deals around the world. Just last month, the EU and Japan (a top 5 dairy importer) announced an agreement in principle that will give EU dairy suppliers a major advantage over U.S. suppliers.
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