USDEC Trade Policy Committee Meeting Managed by Dairy Management - - PowerPoint PPT Presentation

Managed by Dairy Management Inc.™

USDEC Trade Policy Committee Meeting

Welcome & Introductory Remarks

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• Chairwoman Sue Taylor
• Vice-Chair John Wilson
• Secretary Tom Vilsack

Topics Agenda

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• Trade Agreements & Negotiations
• Geographical Indications & Common Food Names
• Global Market Overview in Light of COVID-19
• Global Partnership Development / International Policies
• Market Access & Bilateral Issues
• Q&A
• Conclusion

Theme for 2020: Navigating Uncertainty

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Trade Policy | COVID-19 Response

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• Trade Policy Staff Closely Monitoring:

‒ Policy response measures being developed by trading partners ‒ Risk of foreign market access disruptions as a result of the coronavirus outbreak ‒ Potential for any trade-related steps impacting food/ag that U.S. may take

• Member Action Item:

‒ Thanks to those that have shared feedback to date! ‒ Please advise us and MARA if you’re encountering issues!

Trade Agreements & Negotiations | USMCA

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• U.S., Mexico and Canada have all formally

ratified the deal and notified they are ready to implement it

• USMCA is scheduled to enter into force on

July 1st. – Intense timing push by USTR

• Once entered into force, Canada will have

six months to dismantle the Class 7 pricing scheme

Trade Agreements & Negotiations | USMCA

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• Canada’s method of implementing the policy changes and new access

(TRQ administration) will be key to significance of the agreement

• Implementation issues USDEC is concerned about and is working on

with the U.S. government: – Reforms to Class-7 related dairy pricing policies – Administration of TRQ – Ensuring Mexico doesn’t minimize scope / impact of GI provisions – Ensuring Mexico doesn’t restrict trade through new standards or SPS issues

USMCA – Market Access Refresher

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Key TRQs Yr 1 (MT) Yr 6 (MT) Milk (85% bulk) 8,333 50,000 Cream (85% bulk) 1,750 10,500 Butter 750 4,500 SMP 1,250 7,500 WMP 115 690 Whey Powder (0404.10.20) 689 4,135 Blended Powder (0404.90.10) 460 2,760 Key TRQs Yr 1 (MT) Yr 6 (MT) Cheese (1/2 for “industrial”) 2,084 12,500 Concentrated Milk 230 1,380 Yogurt 689 4,135 Ice Cream/Mixes 115 690 Other Dairy 115 690 Duty Free: WPC (0404.10.90), Lactose (1702), Milk-Based Beverages, Casein & Milk Albumin, WPC (3504), Food Preps (1901.10.20, 2106.10, 2106.90);

USMCA – Class 7 Refresher

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• Class 7 will be eliminated 6 months after implementation
• New pricing structures will be established:

‒ SMP, MPC & infant formula

• New class will use U.S. Class 4 non-fat prices, Canadian make

allowances & yield factors (excludes animal feed uses) – USMCA Upshot: Bars Canada from dropping base price below U.S. Class 4 even if EU/Oceania prices are lower

‒ Other products

• New class prices must be established based on end use

Trade Agreements & Negotiations | Kenya

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• USTR formally notified Congress of intent to begin negotiations
• Deal is expected to be a full FTA requiring Congressional approval
• While Kenya provides limited dairy export opportunities in the short

term, USDEC believes an agreement with solid provisions on GIs, SPS and cooperation in international forums could set a precedent for forthcoming negotiations with other African partners

• Kenya by the Numbers

– Population: 51M+ – Domestic Consumption: estimated to be 115L/capita with demand growth expected to exceed domestic production by 1.28B Liters in 2022.

Trade Agreements & Negotiations | Japan

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• Japan Phase One – Key “Down Payment” for Dairy

– Implemented on Jan. 1st. – Helping exporters maintain competitiveness for most products

• 78% of US dairy exports included in deal or already MFN duty-free
• Comprehensive Negotiations – timing TBD

– Our focus: expanded access; GIs; SPS – Comprehensive agreement will require Congressional approval

Trade Agreements & Negotiations | UK

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• UK & U.S. expected to launch FTA talks in May

‒ USDEC’s negotiating objectives:

• Broad tariff liberalization
• Full recognition of U.S. dairy system to resolve &

prevent SPS/TBT issues

• Establishing usage rights for common names and a balanced

approach to dealing with GI policy

‒ UK’s published negotiating objectives align well with U.S. goals

• Negotiations will be difficult & complex though given parallel EU talks

Trade Agreements & Negotiations | UK

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Trade Agreements & Negotiations | China

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• Phase One went into effect on Feb. 14th
• Recap of Key Dairy Deliverables

‒ Recognition of U.S. dairy food safety system ‒ Firm timeline commitments for new dairy facility registrations, new product approvals ‒ Commitment to approve dairy permeate for food application ‒ Authorization of U.S. exports of various fluid milks, including ESL ‒ Reduction of burden on infant formula companies’ exporting requirements ‒ New due process measures for GIs, common food names ‒ Ag purchase commitment of $32B more; includes dairy

Trade Agreements & Negotiations | China

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• TBD: Will China honor purchase commitments of $32B more U.S. ag

products, including dairy, (beyond 2017 baseline level)? ‒ COVID-19 pandemic dampens likelihood China can fulfill purchase commitments

• Member Action Item: USDEC asks members to share China dairy

purchases on a business confidential basis ‒ Aggregate value of Chinese purchases will be reported to the U.S. Trade Representative’s office

• USTR uses this data to help track Chinese purchase commitments in

real time in lieu of reliance solely on lagged trade data

Trade Agreements & Negotiations | China

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• Snapshot of Progress 2.5 Months In

‒ Dairy MOU – effort to update prior agreement underway

• USDEC key priority – removal of all audit requirements in light
• f Phase 1

‒ Dairy facility list being updated quickly (within 20 working days) ‒ U.S. now has access for ESL, fortified, and ultra-filtered milks ‒ Dairy permeate for food application progressing smoothly; final approval likely circa mid-May ‒ Guide re: GIs & generic term evaluation published for public comment that aligns strongly with Phase 1 terms

• U.S. & Brazil Presidents “instructed their trade officials to

deepen discussions for a bilateral trade package this year.”

• USTR in mid-April noted progress to date & more to come

– Goal: “concluding in 2020 an agreement on trade rules and transparency, including trade facilitation and good regulatory practices” – Engagement to be conducted re: focus

• House Democratic concerns

Brazil – Long-Shot, But … Possibility

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• Brazil is a member of Mercosur, a customs union with

uniform external tariffs

– Mercosur partners: Argentina, Uruguay & Paraguay – Will make tariffs difficult to deal with in negotiations

• Examples of Brazilian Dairy Consumption

– Cheese 815,000 MT – WMP 672,000 MT – SMP 190,000 MT – Butter 93,000 MT

Brazil – Market Opportunity

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Trade Agreements & Negotiations | EU

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• Possible Limited Deal

– EU and U.S. trade officials had been engaging on a possible limited trade deal ahead of the COVID-19 outbreak

• Talks currently on hold
• Ag focus: some set of SPS issues
• USDEC Focus

– Encouraging greater focus on more valuable FTA partners – Ensuring that any deal, even a limited one, would not exacerbate dairy trade deficit with EU

Geographical Indications & Common Food Names

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• Enhanced Lobbying Strategy on Common Names Protections

– Goal: Create U.S. policy that stipulates a list of protected common names is to be included in any new trade agreement – CCFN is collaborating with other ag sector groups to coordinate a swell of multi-sector outreach to Congress and a Congressional letter to USTR – Also seeking Congressional hearing

• CCFN is developing a trademark logo that can

be registered globally to preserve common usage rights

• Work ongoing in various markets including

– Australia, Mercosur, China, Singapore, Mexico, UAE and elsewhere

Global Market Competitiveness in Light of COVID-19

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U.S. DAIRY EXPORT COUNCIL 22

U.S. Diverged from World Market in Cheese

$2,000 $2,500 $3,000 $3,500 $4,000 $4,500 $5,000 $5,500 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Cheese Price Comparison

Cheddar - US Cheddar - NZ Cheddar - EU

U.S. DAIRY EXPORT COUNCIL 23

EU Prices Following U.S. Down in SMP, Butter, NZ Maintaining Premium For Now

$1,200 $1,400 $1,600 $1,800 $2,000 $2,200 $2,400 $2,600 $2,800 $3,000 $3,200 2018 2019 2020

SMP Price Comparison

NFDM - US SMP - GDT SMP - EEX $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 $5,000 $5,500 $6,000 $6,500 $7,000 2018 2019 2020

Butter Price Comparison

(80% Milkfat Equivalent)

Butter - US Butter - NZ Butter - EU

U.S. DAIRY EXPORT COUNCIL 24

Caveats:

1. Public spot prices are not export sale prices 2. Countries chosen are illustrative

Will Spot Price Disparity Overcome Tariff Disadvantages?

Cheese Butter NFDM/SMP China* YES YES YES Vietnam YES YES YES Indonesia YES YES

In-quota: YES; Out-of-quota: NO

Brazil NO NO NO

*Assuming Retaliatory Tariff Exemption

U.S. DAIRY EXPORT COUNCIL 25

EU Nearing Public Intervention Levels in Skim

$1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 $5,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

World Skim Milk Powder Prices and European Commission Intervention Price

NFDM - CME SMP - GDT SMP - EEX EU SMP Intervention Price

U.S. DAIRY EXPORT COUNCIL 26

Will It Be Enough to Give the Market a (Temporary) Floor?

Product PSA Public Intervention Total In Storage Butter 140,000 50,000 190,000 Cheese 100,000 100,000 SMP 90,000 109,000 199,000 Milk Solids Equivalent 266,000 148,000 414,000 MT Liquid Milk Equivalent 3.2 million MT

Global Partnership Development / International Policies

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• International Organizations - e.g., WHO, FAO

‒ Increasingly anti-trade, anti-animal and anti-dairy agenda ‒ Barometer for national priorities and driver of public opinion ‒ May present less threat to some competitor regions

• International Standards - e.g., Codex and OIE

‒ Market access that is built on science and risk-based standards ‒ Basis in trade law – WTO SPS agreement ‒ We have a seat at the table through international partners

International Orgs/Standards Why They Matter

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International Organizations

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• World Health Organization (WHO)

– Impacts of U.S. decision on funding… – Annual “World Health Assembly” to be held virtually on May 18— COVID Focus – USDEC watching an earlier decision related to digital marketing to children that could negatively impact dairy

• Food and Agriculture Organization (FAO)

– Negotiation of Sustainable Food Systems and Nutrition Guidelines – USDEC activating USG and GDP/IDF on dairy concerns

International Standards

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• Codex & OIE Updates

– USDEC engaging heavily on labeling/nutrition topics that could harm dairy exports and consumption – Working with allies and US government in a proactive manner to preempt EU or activists’ actions to negatively impact US milk production – In OIE we’re working through IICA, and with other organizations including NMPF, to build alliances to prevent future restrictions of

• n-farm practices and tools related to animal care.

Global Partnership Development

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• Expanding Relationships with IICA

– COVID Response and Recovery—shaping strategy and narrative – Continued focus on Codex and International Organizations

• FEPALE

– Utilizing technology to reengage Codex delegates – Enhancing collaboration on FAO and food systems issues

• IDF/GDP

– Effective mobilization compliments IICA and FEPALE engagement

Key Bilateral Issues | Mexico Tomatoes Issue

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• Mexico tomato seasonality issue: Risk of dairy retaliation

– White House has floated the idea of imposing Section 232 tariffs in response to complaint of Mexican dumping tomatoes in U.S. – Mexico has strongly pushed back, threatening tariff retaliation specifically aimed toward dairy products – USDEC Approach:

• Monitoring closely
• Connecting with other ag sectors
• Communicating concerns to USTR

Market Access & Bilateral Issues

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• Regular monitoring of potential for regulatory requirements that

may need complementary policy pressure to help resolve them.

• Work as a team on other initiatives such as tariff initiatives in

Vietnam to encourage governments to lower their import duties

• Examples include work underway in

Colombia, Indonesia, Mexico, Costa Rica, Panama, and others.

Comments? Questions?

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Thank you!

Jaime Castaneda, Shawna Morris & Tony Rice jcastaneda@usdec.org smorris@usdec.org trice@usdec.org 35