[CTC] Background Briefing on Trans Pacific Partnership Negotiations

[Andrew Gussert]

March 11, 2010 

The Honorable Ron Kirk 
United States Trade Representative 
600 17th Street NW 
Washington, DC 20508 

Dear Ambassador Kirk, 

We understand that the first meeting of the Trans-Pacific Partnership (TPP)
Agreement will be held later this month. We write to urge very careful
attention to dairy trade concerns in these negotiations. 

As you prepare for these negotiations, we wanted to highlight the potential
impact of such an agreement on dairy farmers and many processors in the U.S.
if U.S.-New Zealand dairy trade is not addressed properly. We have been
informed that losses to U.S. dairy producers may total up to $20 billion
over the first decade of the agreement if U.S. dairy restrictions on exports
from New Zealand are fully phased out in the TPP. Moreover, America's dairy
exporters do not have the prospect of focusing on other significant new
opportunities that the agreement would open up given that most other TPP
participants are already U.S. free trade agreement (FTA) partners or have
relatively limited tariffs and offer only small additional market
opportunities. 

Despite New Zealand's small size, its dairy industry is a global power. New
Zealand's dairy industry is dominated by one company that operates as a
virtual monopoly in controlling more than 90 percent of the country' milk
production and approximately 40 percent of trade in key internationally
traded dairy commodities. In light of this market power, the Administration
should consider whether genuine competition is possible as it proceeds with
the TPP. 

New Zealand has demonstrated its capacity to funnel product to the U.S.
market as evidenced by the sizable quantities of milk protein concentrates
(MPCs) and casein imported each year into the U.S. from New Zealand. MPC and
casein imports enter the U.S. virtually tariff-free and with no volume
quotas unlike imported nonfat dry milk, butterfat or most cheeses. The
primacy that New Zealand assigns the U.S. market and its ability to devote
considerable amounts of its production to exports to the U.S. are clear. 

According to testimony submitted recently to the International Trade
Commission, imports of New Zealand dairy products facing tariff-rate quota
limitations generally account for a relatively small proportion of New
Zealand's total exports of such products. In contrast, New Zealand's sales
of MPC and casein imports to the U.S. market generally account for over
fifty percent of its exports of these products to all destinations. Clearly,
New Zealand has taken full advantage of all favorable opportunities to grow
its dairy exports to the high-value United States market and would likely do
so with respect to any additional such opportunities for the even
higher-valued, currently tariff rate quota (TRQ)-restricted products if
trade in them is expanded under the TPP. 

Because of the anti-competitive practices in New Zealand's dairy industry
and the extensive degree of control it wields over world dairy markets to
the detriment of the U.S. dairy industry, we are deeply concerned that an
expansion of U.S.-New Zealand dairy trade would further open the U.S. to
these imports while providing little additional market for American farmers
in New Zealand and the other Pacific countries. This prospect is
particularly troubling given the record low dairy prices American farmers
have faced since late 2008 and the need for our dairy industry to rebuild
export markets to help remedy the harm caused by these low prices. As you
proceed with negotiations, we ask that you carefully consider and discuss
with us how best to address within the TPP this unique threat posing such
great potential harm to the future viability of America's dairy industry. 

Sincerely, 

Senator Feingold 
Senator Crapo 
Senator Specter 
Senator Bennet 
Senator Bingaman 
Senator Sherrod Brown 
Senator Burris 
Senator Cantwell 
Senator Casey 
Senator Collins 
Senator Feinstein 
Senator Franken 
Senator Gillibrand 
Senator Kerry 
Senator Klobuchar 
Senator Kohl 
Senator Leahy 
Senator Levin 
Senator McCaskill 
Senator Merkley 
Senator Murray 
Senator Risch 
Senator Sanders 
Senator Schumer 
Senator Shaheen 
Senator Snowe 
Senator Stabenow 
Senator Mark Udall 
Senator Tom Udall 
Senator Wyden

 

 

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