The Future of Animal Agriculture in North America - Farm Foundation

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shift will likely impact domestic dairy industries. Limited
volumes of fluid milk products are traded because of the highly
perishable nature of bottled milk.
Dairy Product Exports
According to the Food and Agriculture Organization (FAO) of
the United Nations, world trade of milk and dairy products is
limited, with only 12 percent of world production traded
between countries (Figure 12). The EU makes up 64.4 percent
of world trade followed by Australia and New Zealand. Most
EU dairy exports are intra-EU, with only an estimated 25
percent of exports sold to non-EU countries.
North America dairy exports totaled only 3.7 mmt in 2003.
The United States had 75 percent of the area’s shipments (2.8
mmt); Canada, 0.8 mmt; and Mexico, 0.1 mmt. After
removing intra-EU dairy exports, New Zealand was the largest
single exporter, with nearly 15 percent of the world’s total.
Australia has also become a major dairy exporter, making up
5.8 percent. Both New Zealand and Australia have increased
export volumes more than 2.4 times since 1985. Argentina was
the only other Western Hemisphere nation exporting more than
1.0 mmt of dairy products in 2003. Brazil increased its milk
output and exports to 134,000 mt in 2003, from 8,000 mt in
1995. According to the FAO, the only other non-EU countries
with at least 0.5 mmt of dairy exports in 2003 were Belarus
(0.9 mmt); Ukraine (0.9 mmt); Switzerland (0.6 mmt); and
Uruguay (0.5 mmt).
U.S. dairy product exports were shipped to a large number of
countries, including Mexico (25 percent) and Canada (18
percent) in 2004 (USDA, FATUS Database). Japan,
Philippines, Central America and the EU accounted for an
additional 20 percent, with the remainder sold to more than 30
other nations. By type of dairy products exported by the United
States, 33 percent were nonfat dry milk powder, 15 percent
cheeses and about 10 percent whey, evaporated milk and butter
products, and 40 percent a variety of other dairy products. The
most important customer of U.S. dairy product exports is
Mexico, which purchases primarily nonfat dry milk powder.
Dairy Product Imports
North America imported only 7.3 percent (5.5 mmt) of the
world’s total volume of dairy imports in 2003 (Figure 13). Of
that, Mexico accounted for 48 percent; the United States, 38
percent; and Canada, 13 percent. World dairy product import
volumes have increased by more than 50 percent, growing to
75.6 mmt in 2003 from 50.0 mmt in 1985 (FAOSTAT
Database). North American imports grew at a faster pace
during this same period, increasing 63 percent to 5.5 mmt from
3.4 mmt. The world’s largest dairy product importer is the EU,
with its 25 member-nations representing more than half of
world import volumes (38.1 mmt). As with exports, a large
portion of these imports are intra-EU trade.
Global Competitiveness and Trade
In North America, the United States it the only nation
currently capable of exporting substantial quantities of dairy
products. Its export markets are growing as China, Russia, and
Central American and Caribbean countries realize economic
expansion. New Zealand has been the newest and most
interesting export customer for the United States in 2004 and
2005, purchasing large amounts of nonfat dry milk. As New
Zealand has continued to increase dairy product exports, it may
be reaching its capacity to expand its dairy cattle herd. New
Zealand simply may not have enough land area to increase its
dairy herd and milk output.
The key competitors to North American dairy exports are the
EU, New Zealand and Australia, which dominate world dairy
trade. Each exports dairy products into North America and
competes with the United States in selected export markets.
Other emerging competitors are Argentina and Brazil, which
have seen tremendous growth in milk productions during the
past decade.
Dairy and Trade Agreements
Further developments in multilateral, regional and bilateral
trade negotiations could have important influences on dairy
trade. Milk and dairy products continue to be one of the most
sensitive agricultural issues in trade negotiations, often forming
roadblocks for multilateral and regional trade agreements. Many
countries maintain very restrictive dairy tariffs, well in excess of
100 percent of the product’s value, and operate extremely
limited tariff rate quotas. Despite this, world dairy trade sustains
modest increases in trade flows as more and more barriers are
reduced or eliminated under a variety of trade accords.
NAFTA has been instrumental in opening up markets for North
American dairy products. The Central America-Dominican
Republic Free Trade Agreement (CAFTA-DR) and the
Australia-U.S. Free Trade Agreement (AUSTA) will further
expand trade in dairy products. All three trade accords will gradually
phase out dairy product tariffs during 15 years to 18 years.
The sensitivity of dairy policies—especially in the EU, Japan,
Canada and the United States—has limited milk and dairy
discussions during World Trade Organization (WTO)
negotiations. However, WTO is striving to reduce dairy price
supports and other subsidies in these developed countries,
which may open markets and expand dairy product trade.
International Market Institutions and Key Players
International institutions play a key role in shaping the
direction and magnitude of trade in animals and meats. Some
institutions, such as the WTO, set rules. Others, such as the
NAFTA or CAFTA-DR, provide preferential market access.
The World Organization for Animal Health (formerly known
as the Office of International Epizootics and still known by the
acronym OIE) and the Codex Alimentarius Commission