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  March 16, 2010

If you read the New Zealand press, the importance of the much-discussed Trans-Pacific Partnership (TPP) Free Trade Agreement is made clear: New Zealand is “primed to pounce” like cats to the milk dish. Their self-proclaimed ultimate goal in the trade negotiations that kicked off Monday in Melbourne, Australia is “a free trade agreement with the United States.”

Dairy products (butter, cheese, powder, proteins) are New Zealand’s number one export, and their nation’s economy is heavily reliant on dairy. Press reports interviewing Fonterra’s leaders make clear the U.S. is already New Zealand’s top customer. They see the U.S. as an ever-fertile market for the tilling.

Currently, there are tariff-rate quotas on butter, cheese, powder, and other “traditional” dairy products, but not on milk protein concentrate (MPC) or casein. If the TPP goes forward to expand trade between the U.S. and New Zealand—without an exception for dairy—we’re likely to see an end to, or significant reduction in, the tariff rates and quotas on those traditional dairy products at a time when U.S. dairy farmers want to see tariff rate quotas added for unregulated imports like MPC and casein.

The TPP trade talks seek to establish a “free trade region” in the East Pacific and the Obama administration wants the U.S. to be part of that. In a nutshell, the TPP does for the East Pacific region what NAFTA did for the North and South American continents.

News reports indicate that President Barack Obama aims to double U.S. exports in five years. His administration views one strategy is to strengthen the U.S. position in Asia by joining this TPP. Australia, Peru and Vietnam also seek to join the TPP, which currently includes Chile, Singapore, New Zealand and Brunei.

Therein lies the problem for dairy producers. The TPP might offer dubious export opportunities to some sectors of the U.S. economy (i.e. service industries, ‘clean’ energy technologies, and a few un-named manufacturing sectors), but to a larger degree, it poses the threat of an open-door policy to dairy imports from New Zealand and Australia, not to mention Chile (where New Zealand’s Fonterra is busy setting up shop).

It is questionable whether the TPP offers a positive tradeoff for the U.S., even in general. On the one hand, the Peterson Institute for International Economics in Washington D.C., for example, is quoted as saying that if the TPP goes forward to establish an East Asia Free Trade Area, and if the U.S. is excluded from this TPP, it could cost U.S. companies “at least $25 billion in annual exports, or about 200,000 high-paying jobs.”

On the other hand, Senator Al Franken's office (D-Minn) estimates that if dairy is included in expanded trade with New Zealand, the potential cost to the dairy industry would be $20 billion.

Is that a tradeoff this nation can really afford? What about the dairy farmers here who are losing their shirts, not to mention their farms? Isn’t it high time that we protect our food production, just a little, please?

The U.S. already has free trade agreements with four of the seven countries that are either in the TPP or trying to get into the TPP. They are Australia, Chile, Singapore and Peru. What do the other three (New Zealand, Brunei, and Vietnam) offer the U.S. in terms of export markets? Okay, we can sell clean energy technology to countries like Vietnam that need to clean up their air.

But for agriculture, particularly dairy and beef, the ship would sail one-way in the other direction: From New Zealand to the U.S.

Read how the New Zealand press sees it.


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