ITC Trade Probe Supported by Dairy Processors

June 5, 2001

Janet Nuzum, vice president and general counsel for the International Dairy Foods Association (IDFA), told the International Trade Commission (ITC) that the commission's investigation of the barriers to international trade in processed foods is supported by IDFA. She said the association is working for trade negotiations that would increase U.S. dairy export opportunities.

"As you know, U.S. exports of processed foods are increasing, and dairy foods are contributing to this increase. Yet many barriers, both tariff and non-tariff, hinder our opportunities," Nuzum said. "As the United States negotiates trade agreements at the multilateral, regional, and bilateral levels, it is critical that these agreements include meaningful commitments to eliminate, or at least substantially reduce, these barriers to market access. To negotiate smart agreements, we need to have good information. That is why your investigation is so important."

Nuzum, who served as an ITC commissioner from 1991-97, made three major points: 1) International trade is important to the U.S. dairy foods industry for the industry's continued growth; 2) Significant obstacles exist in key markets of opportunity; and 3) The dairy industry is more engaged than in the past in attempting to address these obstacles.

She noted that while the U.S. market is sizeable, 96% of the world's consumers are outside our borders. "The U.S. dairy industry realizes that, as large as the U.S. market might be, our opportunities for growth really lie abroad," she said. Moreover, the U.S. market is a largely mature market, where consumption of many dairy products is slowing or stable. At the same time, the U.S. dairy industry is a relatively low-cost dairy producer. "With elimination of trade-distorting subsidies and other barriers to trade, more U.S. dairy products would be very competitive in international markets," she added.

"Between now and 2020, dairy product markets in developing countries alone are estimated to increase by a level more than triple the size of the current U.S. market. Exports to these markets represent a promising opportunity for growth in sales of U.S. manufactured products. A serious commitment by the U.S. government, with support from U.S. industry, is necessary to achieve enforceable trade agreements that eliminate tariff and non-tariff barriers to trade, including export subsidies, other trade-distorting subsidies, discriminatory or arbitrary technical standards and regulations, and other obstacles to free and open markets," she said.

Nuzum noted that while the European Union (EU) has the largest share of world dairy trade, much of this share is the direct result of its extensive domestic and export subsidies for the dairy sector. This has made it very difficult for the U.S. dairy industry to make inroads into international markets. These trade-distorting subsidies in the EU, as well as Canada, confer substantial unfair advantages to their dairy production and exports, depressing world market prices and robbing market share in world dairy trade away from less subsidized competitors.

"Complete elimination of export subsidies is the first priority of the U.S. dairy industry in WTO (World Trade Organization) agricultural trade negotiations," Nuzum said. Tariff barriers and an assortment of other regulatory barriers impede U.S. dairy exports in many markets, she noted, including unreasonable packaging and labeling requirements, pre- and post-shipment testing and inspections, mandatory recipe and manufacturing information, shipments held at port of entry for lab testing or other sanitary examinations, unreasonably short shelf-life provisions, pre-import registration and licensing requirements, and limitations on international approved colors and food additives.

Nuzum expressed IDFA's commitment to pushing for meaningful negotiations, and for enforcement of existing trade agreements. She also expressed IDFA's support of the role of the WTO. "We believe that multilateral negotiations in the WTO provide the best and most important opportunity to strengthen international trade rules to remove artificial advantages or protections and truly open markets for U.S. dairy products and dairy-containing foods," she said.

And while regional and bilateral free trade agreements are positive supplemental steps, they are not enough: "Until distortions from European dairy subsidies are removed from the international marketplace, competition from subsidized dairy products will continue to disadvantage U.S. dairy foods exporters. The most effective means of eliminating the trade distortions of EU subsidies is through WTO reforms."

Because the process of launching a global round is slow and bilateral and regional accords can provide welcome momentum, "we also support the negotiation of a Free Trade Area of the Americas, as long as it includes, not excludes, commitments from Canada to open its long-protected dairy markets," Nuzum said.

Nuzum added that as U.S. dairy processors compete with foreign products both at home and abroad, they also confront the fact that protectionism at home hurts competitiveness abroad. She focused here on the U.S. sugar program.

"[Dairy] processors and manufacturers are significantly disadvantaged by the U.S. sugar program, which artificially restricts foreign supply and increases the cost of sugar in the U.S. market to two to three times the world market price. These higher costs... make it more difficult for U.S. dairy foods companies to be competitive with foreign manufacturers of milk, yogurt and ice cream who do not face such a restrictive sugar policy in their countries of manufacture."