It might be too soon to write off the Trans Pacific Partnership (TPP) talks as a lost cause. Negotiators are putting their best spin on continuing discussions, and still say there is an opportunity to seal a deal in the coming weeks. But the calendar is not on their side.
A pending election in Canada Oct. 19 has left Prime Minister Stephen Harper with very little time or room to negotiate a deal. And if negotiators don’t get a deal done very soon, the long shadow of the 2016 U.S. elections could blot out any hope of passage here.
Dairy has been central to the negotiations from the get go. The National Milk Producers Federation and the U.S. Dairy Export Council were initially opposed to the deal, fearing it would let in a flood of imports from New Zealand.
Most everyone I’ve talked to say those fears are overstated. New Zealand is almost totally focused on Southeast Asia, and China in particular. And Domino’s is sourcing its pizza cheese for New Zealand and Australia from California. (Granted, there is some cheese currently coming into the U.S. from New Zealand—but that’s not likely long-lived or permanent.)
Then the unexpected happened. Canada announced in December 2012 that it wanted in on the TPP. And NMPF/USDEC saw an opportunity. They knew, I suspect, that fighting the TPP to exclude New Zealand dairy products was likely a losing proposition—especially if far more powerful trade interests both here and abroad favored the treaty.
So they said they would accept lowering U.S. dairy tariffs if—and only if--U.S. gained more access to Canadian (and Japanese) markets. And then they went to work garnering bipartisan support from 22 U.S. Senators, led by Diane Feinstein (D., Calif.) and Mike Crapo (R., Idaho). It was a brilliant move. And it worked.
Dairy was front and center in the TPP talks in Hawaii. Reportedly, Canada was willing to give a little, but not nearly enough to satisfy U.S. demands for access. Ditto Japan. Issues with dairy, autos and pharmaceuticals ground the talks to a stalemate.
There’s more than a little bit of chutzpah in all of this-from all parties. Past trade agreements have proved to be beneficial—pretty much to everyone.
For example, Canada was the biggest winner in the North American Free Trade Agreement (NAFTA) 20 years ago. Canada’s trade with the U.S. has increased 80% since 1989, even though Canada has carved out and protected its dairy industry.
At the same time, Canada has become among the top destinations, or trans-destination, for U.S. dairy products. Canadian food manufacturers can’t get enough dairy ingredients to fill their own export orders. So they’re allowed to buy U.S. dairy ingredients (including U.S. milk protein concentrates) to fill those orders. A stagnant Canadian dairy industry is another reason Canadian cheese processors have come to the United States to buy and build plants.
Advocates of U.S. dairy export policy also say global demand will continue to grow as world population grows and middle class incomes increase. The Trans Pacific Partnership, which encompasses some 40% of world economic activity, will go a long way in boosting Pacific trade and per capita incomes.
If the global dairy industry wants to become less dependent on China and Vladimir Putin, getting the Trans Pacific Partnership passed seems like a no-brainer.
