For the first time since December, world marketprices for skim and whole milk powder jumpedon the GlobalDairy Trade auctionlast week.
The increased prices, say analysts, came more as a result of a free trade agreement between New Zealand and China than they did from a resurgence in Chinese or global demand. That's disappointing. But it also drives home the importance of being involved in global trade agreements.
The increased shipments of New Zealand milk powder came mainly as a result of lower tariffs China is charging New Zealand, negotiated through the China/New Zealand Free Trade Agreement. China had been requiring a 10% tariff on milk powder, but lowered that to 2.5% for 140,358 metric tons annually beginning January 1.
China quickly purchased enough product to fill its annual quota at the lower tariff, temporarily boosting demand. But the point remains that New Zealand got those sales even though U.S. skim milk powder prices are lower, and thus more competitive, than world prices.
The importance of trade agreements was also reinforced by the National Milk Producers Federation (NMPF) last week.NMPF thanked the U.S. government for its work on clarifying the use of commonly used food names, known as geographical indicators (GIs), in the Central American Free Trade Agreement. The European Union has been pushing the use of GIs in a free trade agreement with Honduras in an attempt to block sales of parmesan, provolone and brie from other countries.
"The U.S. Trade Representative's work with Honduras was particularly important, since a previous lack of easily accessible information in Honduras hurt our own efforts to determine our ability to keep common cheese exports to that country," explains Jim Mulhern, NMPF CEO.
And then we come to the Trans Pacific Partnership (TPP), which hopefully will come before Congress for ratification yet this year. NMPF is growing increasingly concerned that Canada is already trying to circumvent that agreement.
"Canada has been considering expanding its restrictions on the use of certain dairy inputs of cheese making to hinder imports," says Mulhern. "If Canada is allowed to continue with this pattern of eroding existing U.S. dairy access, it is difficult to see how new trade agreements with them will benefit our dairy industry."
Engagement remains key. The choice is not between what was negotiated in the TPP and the status quo, says Phil Karsting, Administrator of USDA's Foreign Agricultural Service. "The choice is between the TPP and trade where we don't have a say in defining rules," he says.
Without TPP, other bilateral trade agreements could, and likely would, proliferate. Transparency, like in the case of Honduras, would continue to be a problem. The Trans Pacific Partnership could set a higher standard for all trade agreements moving forward, forcing the Canadians, the Chinese and the Europeans, to play by new rules.
None of this will come automatically, and vigilance will need to be constant. But at least by participating, the United States will have legal standing to challenge violations if and when they occur. You milk check will be better off for it.