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USDA predicts TPP would be net positive for U.S. dairy

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A new USDA analysis shows the Trans-Pacific Partnership would initially increase U.S. dairy exports by up to $275 million annually and by as much as $1.8 billion when fully implemented.

Full implementation of TPP — a trade treaty involving the U.S. and 11 other Pacific Rim countries — would come in 2032.

USDA economists analyzed four models aimed at determining the outcome for U.S. dairy producers if Congress adopts TPP.

The U.S. International Trade Commission’s long-term model includes higher-value processed dairy products, such as ice cream and infant formula, and economy-wide and cross-commodity effects not included in the other economic models analyzed by USDA.

All four models — by Virginia Tech, the University of Missouri, American Farm Bureau and the trade commission — show a net increase in U.S. dairy exports that underscores the importance of TPP, according to USDA’s office of the chief economist in its report, “Why Trade Agreements Matter: The Case for U.S. Dairy.”

If the U.S. rejects TPP, Virginia Tech’s Center for Agricultural Trade projects an annual loss of nearly $31 million in U.S. dairy exports and $11.5 million in producer welfare, reflecting the preferential access competitors such as New Zealand and Australia would gain in TPP countries.

USDA’s analysis points out U.S. dairy exports have grown more than fivefold during the last 15 years, reaching a record $7.1 billion in 2014 and tripling the share of domestic milk production exported to as much as 15 percent. It also found that continued growth of the U.S. dairy sector is largely contingent on trade.

“The U.S. market is fairly mature and per-capita consumption is not expected to expand significantly, which makes overseas markets increasingly important to producers’ returns,” the economists stated.

Free trade agreements have contributed to export growth and have helped address tariff and nontariff barriers, according to the report. U.S. dairy exports to FTA partners grew from $690 million before the agreements to $2.8 billion in 2015.

The International Dairy Foods Association, U.S. Dairy Export Council and National Milk Producers Federation all support TPP, said Beth Hughes, IDFA director of international affairs.

“We think it’s critical for our industry and for our export markets,” she said.

Exports are part of IDFA’s processing members’ long-term plans for growing their businesses, and the Asian Pacific region is a natural place for the U.S. to increase exports, she said.

Other countries are already looking at trade agreements, and some are underway. If Congress doesn’t implement TPP, the U.S. will give the upper hand to other countries and be subject to higher tariffs that will make the U.S. unable to compete, she said.

“We’ll be pushed out and lose market share,” she said.

The U.S. share of global dairy markets has grown from 4 percent in 2000 to 14 percent in 2014. Asia offers new opportunities due to a substantial increase in per-capita income, which is expected to far surpass the world rate, USDA reported.

In addition to providing market-access gains to key countries — such as Japan, Malaysia, Vietnam and Canada — TPP also breaks new ground with rules on nontariff barriers, including sanitary and phytosanitary measures, geographic indicators, biotechnology and organics, USDA reported.

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