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

USDEC Trade Policy Committee Meeting Managed by Dairy Management Inc.™

Welcome & Introductory Remarks • Chairwoman Sue Taylor • Vice-Chair John Wilson • Secretary Tom Vilsack 2

Topics Agenda • 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 3

Theme for 2020: Navigating Uncertainty 4

Trade Policy | COVID-19 Response • 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! 5

Trade Agreements & Negotiations | USMCA • 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 1 st . – Intense timing push by USTR • Once entered into force, Canada will have six months to dismantle the Class 7 pricing scheme 6

Trade Agreements & Negotiations | USMCA • 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 7

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

USMCA – Class 7 Refresher • 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 9

Trade Agreements & Negotiations | Kenya • 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. 10

Trade Agreements & Negotiations | Japan • Japan Phase One – Key “Down Payment” for Dairy – Implemented on Jan. 1 st . – 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 11

Trade Agreements & Negotiations | UK • 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 12

Trade Agreements & Negotiations | UK 13

Trade Agreements & Negotiations | China • 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 14

Trade Agreements & Negotiations | China • 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 15

Trade Agreements & Negotiations | China • 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 of 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 16 comment that aligns strongly with Phase 1 terms

Brazil – Long-Shot, But … Possibility • 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 17

Brazil – Market Opportunity • 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 18

Trade Agreements & Negotiations | EU • 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 19 exacerbate dairy trade deficit with EU

Geographical Indications & Common Food Names • 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 20

Global Market Competitiveness in Light of COVID-19 21

U.S. Diverged from World Market in Cheese Cheese Price Comparison $5,500 $5,000 $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Cheddar - US Cheddar - NZ Cheddar - EU U.S. DAIRY EXPORT COUNCIL 22

EU Prices Following U.S. Down in SMP, Butter, NZ Maintaining Premium For Now SMP Price Comparison Butter Price Comparison $3,200 (80% Milkfat Equivalent) $3,000 $7,000 $2,800 $6,500 $6,000 $2,600 $5,500 $2,400 $5,000 $2,200 $4,500 $2,000 $4,000 $1,800 $3,500 $1,600 $3,000 $1,400 $2,500 $1,200 $2,000 2018 2019 2020 2018 2019 2020 NFDM - US SMP - GDT SMP - EEX Butter - US Butter - NZ Butter - EU U.S. DAIRY EXPORT COUNCIL 23

Will Spot Price Disparity Overcome Tariff Disadvantages? Cheese Butter NFDM/SMP China* YES YES YES Vietnam YES YES YES In-quota: YES; Indonesia YES YES Out-of-quota: NO Brazil NO NO NO Caveats: 1. Public spot prices are not export sale prices 2. Countries chosen are illustrative *Assuming Retaliatory Tariff Exemption U.S. DAIRY EXPORT COUNCIL 24