A shipment of 5,000 cups of Chobani Greek Yogurt from the U.S. to feed the U.S. Olympic team was denied entry to Russia. Chobani is a major sponsor of the U.S. team and the product would have only been consumed by team members. This is a continuation of a three and a half-year ban by Russia on imports of all U.S. dairy products.
Russia closed its market in September 2010 to U.S. dairy products because it demanded changes in the official health certificate from the U.S. government that accompanies product shipments in international trade and provides assurances regarding product safety. Despite extensive technical discussions with USDA, Russia and its Customs Union partners, Kazakhstan and Belarus, have not laid out a reasonable direction for a long-term solution for information on the health certificate. Since joining the WTO in August 2012, Russia is obligated to allow trade in items like dairy products unless it can demonstrate food safety risks.
USDA contacted Russia’s Federal Service for Veterinary and Phytosanitary Surveillance to seek permission for Chobani to supply a one-time, non-commercial shipment of yogurt to Russia using an Agricultural Marketing Service sanitary certificate for export. The Russian government could have accepted the certificate for consumption of the yogurt by American citizens only. This would not have been an out-of-the-ordinary solution because other European countries have waived health and safety requirements for products shipped to and used on U.S. military bases.
The Russian market is not closed to all dairy product imports. According to estimates by the Foreign Agricultural Service (FAS) of USDA, Russia consumes about 800,000 MT of cheese per year and produces about 425,000 MT. Imports for 2014 are projected at 385,000 MT, up from 310,000 MT five years ago. Imports of cheese from the EU account for about one-third of total cheese exports by the EU. Russia is projected to import 150,000 MT of butter this year, up from 107,000 MT five years ago, with consumption this year at 348,000 MT and production at 200,000 MT. Russia is also projected to import 140,000 MT of skimmed milk powder and 50,000 MT of whole milk powder. Belarus is the main import source of whole milk, whole milk powder and non-fat dried milk.
According to FAS, Russia has about 8.5 million milk cows, down from 9.5 million over the past 5 years and continuing a trend of the last 20 years. Yearly production is 3.7 metric tons per cow, about 40 percent of the level of year-around intensive producers like the U.S., Canada and Japan, 60 percent of the less intensive production systems in the EU and about the same as the seasonal pasture system used in New Zealand. Total milk production in Russia is 31.4 million metric tons (MMT) per year, about the same as China and Brazil and the sixth largest of the 13 major producing countries tracked by FAS. Russia is trying to slowdown total dairy product imports to support domestic milk producers and shift more of what is imported to Belarus. Russia is limited by its WTO accession agreement on how much it can subsidize its agriculture; total trade distorting agricultural support could not exceed $9.0 billion per year in 2012 and $4.4 billion by 2018.
Import restrictions are nothing new in the world of dairy trade. The major dairy product exporters – Argentina, Australia, EU, New Zealand, and the U.S. – also have dairy product import quotas. They have all been subject to WTO commitments and converted to tariff rate quotas.
Many trade agreements make some allowance for limits on dairy product imports. The Canada-U.S. Free Trade Agreement of 1988 that became part of NAFTA specifically excluded the Canadian dairy product market. Access to the Canadian market was among the issues that delayed for a year the recent Canadian-EU Trade agreement. The EU will undoubtedly ask for greater access to the U.S. dairy products market in the Transatlantic Trade and Investment Partnership trade agreement now being negotiated. New Zealand was expected to gain more access to the U.S. dairy products market in the Trans-Pacific Partnership trade agreement, but that appears to be less important than additional access to the Canadian and Japanese markets now that they have joined the talks.
World trade for dairy products has grown in recent years with the addition of China and the growth of other markets with limited land area for milk production. The five major producers have improved productivity enough that they have discouraged inefficient producers in other countries from competing in the export market. The use of export subsidies has also diminished and production is being rationalized at a global level.
Russia’s action is incongruous with the general trend in the global market of more openness. Joining the WTO has had zero impact on how Russia treats trading partners when it decides to restricts imports. Russia is lowering average dairy product bound tariffs from 19.8 percent to 14.9 percent as part of its WTO accession. Arguing over health certificates is often used by Russia as a trade barrier. The U.S. has had numerous disagreements with Russia on meat imports in recent years.
In joining the WTO, Russia agreed to abide by the WTO Agreement on Sanitary and Phytosanitary (SPS) Measures. Russia must ensure that all legislation related to technical regulations, standards and conformity assessment procedures complies with the WTO Technical Barriers to Trade Agreement. Russia is to develop and apply international standards on SPS measures through membership and active participation in the Codex Alimentarius and the World Organization for Animal Health (OIE). Translating that high sounding language into action on the ground has been a huge task around the world, not just in Russia.
In the spirit of the Olympic Games, it would have been appropriate for the U.S. or Russia to make an accommodation for this one shipment. Both sides recognize how allowing one exception may establish a precedent that would be difficult to reverse in the future. Consumers and producers can again recognize how narrow the line is between products being available in markets and being shut out. Open markets do not just happen. They are the result of sound science and a willingness on both sides to acknowledge the benefits for producers and consumers.
Ross Korves is a Trade and Economic Policy Analyst with Truth About Trade &Technology (www.truthabouttrade.org). Follow us: @TruthAboutTrade on Twitter |Truth About Trade & Technology on Facebook.