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January 16, 2020

Dairy Reaction to China Trade Deal: Relief Rather Than Elation

 |  By: Jim Dickrell

The U.S. dairy industry’s reaction to the signing of the Phase One trade agreement between the United States and China is one more of relief than elation.

While industry officials say Phase One is a good start, much more needs to be done to eliminate retaliatory tariffs and nontariff barriers for U.S. dairy product exports to China.

“[Yesterday’s] announcement of a deal makes progress on regulatory restrictions and other nontariff barriers hindering dairy trade is a positive step,” says Tom Vilsack, president and CEO of the U.S. Dairy Export Council. “We need to continue to work with our government, China’s government and our customers to finish the job by lifting the remaining Chinese retaliatory tariffs against our exports.”

Randy Mooney, a dairy farmer from Rogersville, Mo., and chairman of the National Milk Producers Federation (NMPF), says dairy farmers have been disproportionally harmed by China retaliatory tariffs. (Note: NMPF estimates dairy farmers have only received about 20 cents on the dollar in Market Facilitation Payments to make up for lost export sales.)

“We appreciate the hard work invested by both the U.S. and Chinese governments, but we urge China to swiftly lift retaliatory tariffs against U.S. dairy products and work with U.S. suppliers to fulfill their purchasing commitment,” says Mooney.

According to NMPF trade analysts, the Phase One agreement did make progress in these areas:

  • Tackling facility and product registration steps that have stymied firms seeking to export to China for several years;
  • Improving the regulatory pathway for exports of infant formula and fluid milk (including extended shelf life milk) to China;
  • Creating new transparency and due process obligations regarding geographical indications and common food names; and
  • Promises of increased purchases of U.S. agricultural goods, including dairy.

Regaining market access to China is imperative. “Over the next decade, China represents a $23 billion market opportunity for U.S. dairy, and it is essential to our producers and companies that we have a trade relationship with China that further levels the playing field for American dairy and provides expanded market access for our growing industry,” says Michael Dykes, president and CEO of the International Dairy Foods Association (IDFA).

IDFA says the retaliatory tariffs imposed by China on U.S. dairy products (in response to U.S. tariffs on Chinese goods imposed by the Trump Administration) saw U.S. sales to China drop by $177 million (13%) in 2018 and another $156 million (26%) in 2019.

Whey product sales have been hit the hardest. In 2018, China bought a third of U.S. whey exports by value. In 2019, January through November whey sales to China were down more than half compared to pre-tariff 2017, says IDFA.