By SUSAN MYKRANTZ

Ohio Correspondent

WASHINGTON, D.C. — Senators representing  the country’s leading dairy states have joined forces with industry representatives to encourage  U.S. Trade Representative Michael Froman to protect the nation’s dairy industry as negotiations on the Transpacific Partnership (TPP) continue.

In a statement dated July 28, the legislators requested Froman’s support for ensuring the domestic dairy industry gains significant market access benefits across all products in ongoing TPP negotiations.

Jeffrey Schott, a senior fellow at the Peterson Institute, billed a nonpartisan pro-trade think tank, believes dairy is more complicated because of the move toward strong protectionism of dairy imports in the restructured dairy program under the 2014 farm bill. The bill established a base for the import of certain dairy products and once those limits are reached, the tariffs have a sharp increase.

Schott said the U.S. dairy sector may have to give up some of its current import barriers in order to access Asian markets in a TPP agreement.

Alan Levitt, vice president of Communications for the U.S. Dairy Export Council (USDEC), explained the United States allows the import of certain dairy products up to a certain level. Once imports for those products reach or exceed that level, there is a substantial increase in the tariffs.

Senators and industry representatives have stressed the need to provide meaningful benefits to U.S. dairy producers and processors and make three specific issues a top priority. First, the senators want to see increased market access and reduced tariffs in Canada.

Canada is a leading export market for U.S. dairy products, valued at $592 million in 2014, notwithstanding what they term as exceptionally high tariffs that create barriers to these dairy products. However, most products are shipped under Canada’s Import for Re-Export Program, which ultimately returns to the United States.

The senators stressed the need for Canada to offer significant and commercially-meaningful market access to U.S. dairy products. Levitt said Canada has been protecting its markets through higher tariffs on certain products.

He said under Canada’s Import for Re-Export program, it will import certain products especially used in the food processing industry that are processed and exported back to this country.

 “We’ve been trying to break down access for dairy products to Canada since the North American Free Trade Agreement,” said Schott. “Canada is playing this very carefully because there’s an election coming up.

“I think Canada cannot afford to stay out of this (TPP) deal.”

Schott added with upcoming elections, Canadian politicians see a greater turnout of voters from pork and beef production areas. “Pork and beef will be big winners,” he said. “Pork producers should have important access to the Japanese market. Dairy is a little more complicated.”

One reason is he believes dairy farmers in Quebec aren’t likely to support those who are pushing for the trade agreement in any event, even if there is no concessions made on Canada’s dairy policy. Last week, he predicted there may be concessions for Canada’s current trade barriers to U.S. dairy products.

As part of a pro-trade think tank, Schott and his fellow economists support freer trade because they think the overall value such as cheaper dairy products for growing Asian populations will create enough economic good to offset potential producer losses elsewhere, such as less dairy production in Quebec.

Second, the senators want the TPP to ensure the domestic dairy industry gains significant market access in both Canada and Japan for key commodities in a balanced way, compared to any new market access granted to New Zealand’s dairy industry into the United States.

New Zealand exports 95 percent of its dairy products. If the U.S. dairy industry does not achieve comparable export gains in Japan and Canada as compared to those made by New Zealand into the United States, the senators are concerned the TPP could damage the U.S. dairy industry’s export opportunities and domestic market share.

Levitt and Schott have mixed reactions on New Zealand’s role in the TPP. “New Zealand is a net exporter of dairy products,” Levitt said. “They are the world’s largest exporter of dairy products.”

To complicate the issue, several mergers of smaller processors over the past decade has left one company authorized by the government to process 85 to 90 percent of the milk produced in the country, creating a monopoly in the industry. This company also owns processing plants in the United States, Europe, the Middle East and Southeast Asia. Recently, other companies have started pushing back and gaining a foothold in the milk processing industry.

On the other hand, Schott doesn’t think New Zealand should be as big a concern for U.S. dairy producers. “The U.S. dairy concern over New Zealand seems a little out of proportion given New Zealand’s limited capacity to increase dairy production,” he said.

“New Zealand also seems more focused on dairy export growth to China and India, where the consumer market for dairy products is growing much faster than in the U.S.”

 Schott added New Zealand isn’t a big country and is already producing milk and dairy products at a high capacity. Since there’s not much room for growth, the country is going to access the export markets that are more attractive and growing. This is yet another reason why significant market access gains for U.S. dairy products into Canada and Japan are seen as essential for the TPP.

Finally, senators want the agreement to allow increased market access and reduced tariffs in Japan. Japan is a leading export market for U.S. dairy products, valued at $407 million in 2014, even though it imposes high tariffs and other trade barriers on those products.

The senators believe it is critical the TPP offers meaningful and expanded opportunities for our dairy products in Japan. Levitt said the USDEC believes with U.S. access to other countries such as Canada and Japan, it would level the playing field with New Zealand.

“It is definitely more than one full-time job to keep up with all of these issues,” said Levitt, adding that with 30 chapters in the agreement, the TPP looks at everything related to commerce issues from rules of trade to access, to trading partners.

Efforts to contact Canadian dairy industry representatives for comment were not successful.