U.S.-China Pact Could Quadruple U.S. Dairy Exports

November 24, 1999

The U.S. Dairy Export Council believes the U.S.-China trade pact could quadruple U.S. dairy exports to China. Dairy exports could be increased as much as $135 million each year.

Thomas M. Suber, USDEC executive director, says China's commitment to reduce tariffs on key dairy products is as much as fivefold. The applied tariff for cheese, now at 50%, will be reduced to 12% over five years once China gains membership in the World Trade Organization. Upon accession, tariffs will be reduced over five years in equal increments.

"The fast food industry in China is poised for tremendous growth," says Suber. "Pizza has been the driving force behind global cheese sales, and these new lower tariffs will make pizza more affordable to Chinese consumers. This will open the door for U.S. exporters to supply cheese to the world's most populous market." Shipments of lactose and ice cream, in addition to cheese, are expected to benefit as well.

Under the agreement, China will reduce import tariffs from 22% to an average of about 17%. Tariffs on lactose, yogurt and food preparations with dairy products, now at 35%, 45% and 25% respectively, will be trimmed to 10%. The tariff on ice cream, now 45%, will be reduced to 19%. The tariff on whey remains at 6%.

In 1997, U.S. exports of lactose to China exceeded $500,000; exports of dairy based infant formula preparations reached almost $1.5 million and total ice cream exports to China and Hong Kong, where produces are reshipped to the mainland, exceeded $6.5 million.

China still must negotiate bilateral trade agreements with the European Union and 23 other nations. No date has been set for the next round of EU discussions, a key remaining roadblock to accession for China, but EU officials have said they welcomed the U.S. pact and agreed with about 80% of the package.

Congress also must grant China normal trade relations (NTR) status before China can gain WTO membership. Assuming congressional approval and the conclusion of pacts with other trading nations, China could join the WTO as early as the first half of 2000, says USDEC.