January 18, 2001

Heightened concerns about the economic problems caused by imported dairy proteins are prompting the National Milk Producers Federation to weigh its options for invoking U.S. trade laws to stem the flow of milk protein concentrate into the country, NMPF announced Wednesday.

Milk protein concentrate (MPC), as the term implies, is a filtered, highly-concentrated form of dairy protein, usually with most or all of the fat, and some of the lactose, removed from the milk. The proteins that remain after the filtration process can and are being used in a variety of food and beverage products in the U.S. -- including in the production of cheese, where federal standards limit the use of MPC to those cheeses which do not have an official standard of identity.

Imported milk proteins consist primarily of ultrafiltered concentrates, and also casein. Imports of the dried form of MPC into the U.S. have increased greatly in recent years, from 10,297 metric tons in 1995, to 54,725 tons in 1999, to 52,118 tons during the first three quarters of 2000, according to USDA data.

The primary exporters of MPC to the United States are the European Union, New Zealand, Australia and Canada. "When the existing trade agreements regulating market access for dairy imports were reached in 1994, milk protein concentrate wasn't technologically a concern to the U.S. dairy sector, and weren't part of the negotiations that established tariff rate quotas on dairy imports," said Jerry Kozak, CEO of NMPF.

"What has happened since then is an unabated surge of MPC imports into this country, which we fear is displacing domestically-produced dairy protein ingredients, and hurting the bottom line of U.S. dairy farmers. So we're going to examine all of our options for better controlling the movement of these ingredients into our country."

Wholesale cheese prices are at near-record lows, and have been for more than 12 months. NMPF is concerned that the use of imported MPCs in dairy manufacturing may be contributing to those low prices by their displacement of domestic cheesemilk, which would also include U.S.-produced skim milk powder. U.S. skim powder is also at extremely low prices, likely due to competition from imported dairy proteins.

Kozak added that the milk protein concentrate issue was raised repeatedly during NMPF's Dairy Producer Conclave discussions last year, and that farmers across the country asked NMPF and other national farm groups to further pursue the question of whether MPC and casein imports were causing economic harm to the domestic dairy sector.

He said NMPF would examine at least four trade policy options:

--Using section 201 of the Trade Act of 1974 - the so-called Escape Clause - to permit the President to provide relief to a U.S. industry where an International Trade Commission (ITC) investigation has found that imports of an article are "a substantial cause of serious injury, or the threat thereof, to the domestic industry producing an article like or directly competitive with the imported article";

--Using Section 301, also a provision of the Trade Act of 1974, which authorizes the U.S. Trade Representative to retaliate against any unjustifiable, unreasonable or discriminatory act or policy of a foreign country. This includes situations involving predatory pricing or discriminatory pricing;

-–Using antidumping laws, which impose additional duties on imports that are sold in the United States at a price that is below that producer's sales price in the country of origin, or at a price that is lower than the cost of production; or

--Using countervailing measures to investigate whether foreign government subsidies that provide financial assistance to benefit the producers or exporters of milk protein concentrate are injuring the U.S. dairy industry.