The growing trade relationship between the U.S. and Colombia is threatening to turn sour for U.S. dairy and industry representatives are asking the Biden administration to step in.
U.S. dairy exports to Colombia have been on the rise thanks to the free-trade agreement the two countries agreed to in 2012, but now the Colombian dairy industry is looking to throw a wrench into the works.
The Colombian government is investigating claims of domestic harm from U.S. exports of milk powder – a process that could lead to safeguard actions to limit imports – and the U.S. dairy sector isn’t happy about it.
Colombia, under the U.S.-Colombia Trade Promotion Agreement, has every right to investigate, U.S. Dairy Export Council Executive Vice President Jaime Castaneda tells Agri-Pulse, but he also stressed that there is rising concern the process will become tainted by domestic politics as elections loom in the South American country. Safeguard actions are temporary import restrictions such as quotas or tariffs.
U.S. dairy exports to Colombia have been climbing as tariffs go down, a sure sign that the agreement is working the way it is supposed to, but the situation is also angering Colombian dairy farmers.
Claiming that domestic producers are being harmed by the influx of U.S. milk powder, they petitioned the government to investigate. The endgame – what Colombian producers want, according to Castaneda – is for Colombia to erect safeguard measures.
U.S. dairy exports to Colombia were relatively small, said Castaneda, “but as the tariffs went down … we began exporting more and more product.”
Colombia’s tariffs on milk powder are dropping 2.2% each year until they are zero in 2026.
Taking advantage of lower tariffs under the free trade agreement between the two countries, the U.S. shipped $78 million worth of whole milk powder to Colombia in 2020, according to data maintained by USDEC and the National Milk Producers Federation. That’s about two-thirds of the total $124 million worth of all dairy products that the U.S. exported to Colombia last year.
The U.S. was only exporting about $21 million worth of dairy goods to Colombia in 2012, the year the FTA was implemented. That nearly tripled to $59 million by 2014 and by 2019, U.S. exports to the country totaled $144 million, according to data from USDA’s Foreign Agricultural Service.
“Colombia is one of our top markets in the world – 11th largest – and we’re only part way into phasing in the U.S.-Colombia FTA’s benefits,” said Shawna Morris, vice president of trade policy for the U.S. Dairy Export Council and National Milk Producers Federation. “The FTA has been instrumental to growing our exports to that market.”
Still, Castaneda argued, U.S. exports are very small compared to Colombia’s domestic production, so there is no way it could be harming the country’s farmers and processors.
“They haven’t been able to prove any harm,” said Castaneda, who testified last month in a hearing that the Colombian government held on the safeguards.
Colombia’s equivalent of the U.S. International Trade Commission would have to show “a significant overall impairment in the position of a domestic industry,” when it comes to the investigation, and U.S. industry officials say that’s not likely under a proper process.
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If Colombia were to enact safeguard measures on U.S. milk powder, they could be applied for two years and then possibly extended for another two years, under the terms of the free trade agreement.
The primary concern is that as Colombia nears its next presidential election in May next year – President Iván Duque is running for another term – there’s a possibility that that there will be political pressure to award the dairy farmers the safeguards they are asking for.
“Sparked by a vocal domestic industry, the Colombian government’s investigation appears to be a politically driven attempt to impose additional tariffs under a safeguard mechanism,” USDEC and NMPF said in a statement.
“It’s a year of elections,” Castaneda said. “That’s why we’re very concerned that the Colombian government may do something that prevents due process.”
And that’s why USDEC and NMPF asked U.S. Trade Representative Katherine Tai to bring up their concerns with Colombian Commerce Minister Ximena Lombana when the two met virtually last week.
Tai did raise the issue with Lombana, a U.S. government official confirmed for Agri-Pulse. Lombana assured Tai that Colombia is “committed to a transparent process” for the investigation.
Lombana also pledged that Colombia will remain in “continued close dialogue with U.S.” during the investigation, the official said.
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