“I want to emphasize the importance of exports to the dairy industry,” Vilsack said. “Since 1994, we’ve seen an increase of $36bn to the bottom line for producers and processors as a result of exports.”
International trade relations
Much of the export market growth can be credited to the role Mexico has played in the free trade agreement, Vilsack added.
Nearly one-third of all US dairy products are exported to Mexico, representing roughly 73% of all Mexican dairy imports. The increase in US dairy exports since 2004 lifted farmers' milk prices by an average of $1.25 per hundredweight.
However, the reciprocal duty free market access is being threatened by other countries looking to Mexico for similar dairy trade deals heightening the need to finalize NAFTA modernization, according to Vilsack.
“Mexico right now is in negotiation with the EU for a free trade agreement and I think what we’re concerned about is which negotiation gets completed first,” he said.
Taking an even broader view, the competitive benefits NAFTA delivers must be also duplicated in other key nations, Vilsack said. The EU, New Zealand and Australia are actively negotiating deals around the world. Just last month, the EU and Japan (a top five dairy importer) announced an agreement in principle that will give EU dairy suppliers a major advantage over US suppliers.
"If the United States stands still, we will slip behind," Vilsack said. "We urgently need a proactive trade policy agenda with key agriculture-importing countries in Asia such as Japan, Vietnam and others in order to keep pace in that growing area of the world."
Cheese exports play crucial role in NAFTA
Vilsack also told the congressional committee that modernization of NAFTA must also include protections against the EU’s efforts to prevent the use of what the US sees as common cheese names without the denoting proper geographical indicators (GIs).
For example, parmesan cheese can only be labeled as such if it comes from the Parma region of Italy: asiago, gorgonzola, and feta are other examples of cheese varieties that would be affected by GI regulations.
The EU recently entered into a deal with Japan that essentially restricts Mexican use of GIs for dairy products.
“We can’t afford to lose this race with the EU," Vilsack said.
Additionally, Canada had entered into a trade agreement with the EU that grandfathers in existing utilization of common names but prohibits and prevents future facilities from being able to use certain cheese names.
“We have to fix what’s broken in Canada,” Vilsack said. “It is a market that is far too closed, it is not transparent and their rules are constantly changing.”