Dairys stake in Colombian Trade Agreement

Jim Dickrell

Last week's dustup between President Bush and the Democratically-controlled Congress over the Colombian Free Trade Agreement (CFTA) could be an ominous sign of things to come.

The Democrats stonewalled the "fast-track" procedure,

On its face, this isn't a huge loss for dairy. The U.S. is currently shipping about $6.6 million worth of dairy exports to Colombia annually. If the agreement were signed, those exports could climb another $25 million annually, according to estimates by the U.S. Dairy Export Council (USDEC).

Given that the U.S. is now exporting more than $3 billion worth of dairy products, an additional $25 million is, well, less than 1%. On a farmgate basis, it's probably only a few hundred bucks per dairy farm, on average, in chump change.

"While the Colombia agreement is not huge for dairy, it would be useful," says Tom Suber, USDEC president. "What is more concerning is the impact the lack of a Colombian agreement would have on other trade negotiations that follow."

Competitors for dairy markets are not sitting still. Ironically, also last week, New Zealand announced a free trade agreement with China. While it will take some years to totally phase in, that clock is now ticking. Plus, the Kiwi-Sino agreement has also energized the Australians to cut a similar deal, says Suber. "None of our competitors is going to stand by and leave settlements like this on the table," he says.

There's also been an awful lot of heated rhetoric, from the two remaining Democratic presidential contenders, that what's bad about the Colombian trade deal is also bad about the North American Free Trade Agreement (NAFTA). And that is truly worrisome.

We hear a lot about China as the big kid on the trading block. But when it comes to dairy, Mexico is critical. Prior to NAFTA, we were shipping about $180 million worth of dairy products to Mexico. Last year, we shipped $850 million of dairy across our southern border, a staggering 367% increase. Whey exports climbed 641%, non-fat dry milk jumped 263%, and even cheese sales were up 237%.

And 2008 will be the first year, after NAFTA's long, 15-year phase-in, that the Mexican market will be finally fully open to U.S. exports. Remember, too, that dairy was a sensitive area for Mexico when NAFTA was being negotiated. "Re-opening NAFTA would always create the opportunity for mischief," says Suber.

Elections matter. Who wins the White House next November will set the tone for future trade agreements. With exports now consuming a tenth of U.S. dairy production, they are absolutely critical to your bottom line.

If an anti-trade candidate takes the White House, it will be incumbent on dairy producers to educate their Congressional representatives on how vital global trade is to their dairy districts' economies.

All politics is local. Now, more than ever, it has global trade implications as well.

--Jim Dickrell is the editor of Dairy Today. You can reach him at jdickrell@farmjournal.com.