Our nation's dairy policy is failing producers. Over the years, the piecemeal solutions to remedy ailing policies have only addressed the symptoms, and consequently further agitated the problem. Meanwhile, a malady that plagues dairy producers' success remains unexamined.
American dairy producers face a serious challenge as they try to deal with an influx of imported milk protein concentrate that is displacing their milk and jeopardizing their livelihood. Imported milk protein concentrate (MPC) is a dry powder product in which certain milk proteins are selectively included while all or most of the water from milk is removed, making it efficient to ship in from long distances. MPC was a relatively new product at the time of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) debates in the 1990s, and therefore was not considered among negotiations on tariffs for dairy products. As a result, MPC enters the U.S. market virtually tariff-free, displacing domestic sales and disrupting the market for American producers.
Exporters of non-fat dry milk, who are subject to current tariff rate quotas, circumvent the tariff system by blending a certain percentage of MPC with their product. Nearly all MPC production occurs in countries such as New Zealand, Ireland, Germany, Australia, the Netherlands, and Canada, countries that are major net exporters of dairy products. The dairy industry in these countries relies heavily on the export markets and many of the countries provide substantial subsidies for MPC production, creating yet another economic incentive for foreign producers to dump large amounts of MPC on the U.S. market.
Like farmers and ranchers across the country, dairy producers have been experiencing weak commodity prices that fail to cover their cost of production. Given these circumstances, recent increases in MPC imports have created an almost unbearable burden. Over the past five years, yearly imports of MPC have risen to 350-400 million pounds, displacing 4-4.6 billion pounds of U.S. domestic milk production. Trade agreements meant to protect producers from just such circumstances have failed to do so in this case, allowing MPC to flood the U.S. market nearly unchecked. American producers have the right to expect protection from unwanted MPC imports through the extension of the tariff rate quotas set by the current WTO agreement for standard non-fat milk.
Legislation has recently been introduced in both houses of Congress that would close the loophole for tariff rate quotas on milk protein concentrate. Both versions of the bill, S847 introduced by Senator Dayton (D-MN) and H.R. 1786 introduced by Representatives David Obey (D-WI) and Gil Gutknecht (R-MN), would establish new tariff rate quotas to regulate MPC imports in the same manner now used for all other imported dairy products. This legislation would provide important and necessary relief to thousands of independent American dairy producers.
America's dairy producers and consumers deserve the protection that U.S. trade agreements were meant to provide. The dairy trade bill would provide that protection by closing the loophole in the current WTO agreement. It is a policy that remedies a source of ailment for dairy producers helping to restore their ability to compete in the marketplace.
Wes Sims, President
Texas Farmers Union
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