Under the TPP agreement, all of Vietnam’s tariffs on dairy products (reaching as high as 20%) will be completely eliminated within five years. Tariffs on cheese, milk powder, and whey will be immediately removed.
The USDA referred to Vietnam as “one of the fastest-growing markets for U.S. food and agricultural products, with U.S. exports totaling $2.3bn in 2015,” a 357% increase from 2007.
Dairy products are currently the fifth largest US export sector to Vietnam, with exports of $168m in 2015.
Increased demand for ingredient products
“As the Vietnamese incomes grew, so did the market for dairy,” IDFA director of international affairs, Beth Hughes, told DairyReporter.
Ingredient dairy products are currently in high demand, with an increasing demand for other dairy products, according to Hughes.
“We’re currently exporting a lot of skim milk powder, whey and formulas,” Hughes said.
“We are also starting to export more cheese to Vietnam; that’s definitely a smaller market, but I do think that will grow over the years.”
Level-playing field
Vietnam, a member of the ASEAN Free Trade Zone, concluded free trade agreements with key US competitors such as Australia, Chile, Korea, and New Zealand. Vietnam's average tariff on agricultural products is 16%, while the average U.S. tariff is 5%.
Under the TPP, Vietnam will reduce and eventually eliminate tariffs across a broad range of food and agricultural products, helping put US exports on a level playing field and giving the US a leg up on non-TPP competitors.
The move to lift tariffs on dairy products from the US will “support the continued growth of a robust US dairy industry,” the IDFA, MNPF, and USDEC wrote in a letter to Congress in April 2016.
“Once TPP is fully completed and ratified, and these tariffs are either phased out or eliminated, the US will be able compete with other countries,” Hughes said.
Other opportunities
In addition to tariffs, the TPP agreement also addresses non-tariff trade barriers, including sanitary and phytosanitary measures.
“I do think the future looks bright for U.S. dairy in Vietnam,” Hughes said.