August 8, 2008

The US dairy industry may not be looking forward to a New Zealand-US free trade agreement (FTA) due to concerns that dairy imports could flood the domestic market.

In Wisconsin, the hub of US dairy, congressional candidate Roger Kittelson warned that the FTA could displace the US dairy sector.

Imports of New Zealand milk and milk products would compete directly with Wisconsin's milk produce.

The US imposes tariffs and quotas to keep out of foreign dairy products but New Zealand-based Fonterra has established a profitable trade in milk powder and milk protein concentrates that did not exist when the quotas were implemented but sell for high prices.

Following a July CNN poll that found over half of Americans oppose free trade and view it as a threat to American jobs, Kittelson questioned how this trade deal would benefit the US dairy sector.

Kittelson, who had spent 24 years as a dairy marketing specialist, said higher prices for dairy products in the US compared to other parts of the world would benefit New Zealand dairy producers but hurt those in Wisconsin.

In March 2002, an economic report said that should the New Zealand-US FTA materialise, New Zealand exports to the US would increase by 51 percent while US exports to the country would rise by about 25 percent, benefiting nearly all of US sectors. Adjustment costs for the US would be minimal, as production in the dairy sector would decline by only 0.5 percent, according to the report.