U.S. and China government officials have been negotiating a new certificate for nearly three years, since China revised its requirements under the dairy certificate in the first part of 2010. Despite continued access to the Chinese market, the lack of an agreed-upon certificate impeded greater U.S. dairy exports, due to the uncertainty of whether the issue would ultimately be resolved.
"U.S. dairy exports to China are on pace to clear $400 million in 2012," says Tom Suber, president, U.S. Dairy Export Council (USDEC). Primarily funded by U.S. dairy farmers through their checkoff investment, USDEC leads industry efforts in resolving overseas dairy regulatory affairs issues and developing export markets. USDEC staff worked closely with Chinese officials and a U.S. inter-agency regulatory team to secure this particular deal.
"With the certificate question settled, we expect U.S. dairy export value to China could more than double by 2017," he says. "Some or all of those sales could have been lost had it gone unresolved."
"Credit goes to China for keeping its market open throughout the certificate negotiation and review process," says Matt McKnight, senior vice president, market access, regulatory and industry affairs, USDEC. "It is not always the case that a country is so willing to work with a major supplier to find mutually satisfactory ways to get the regulatory assurances it requires. They said, in essence, as long as good faith negotiations were moving forward, the market would stay open. If the United States became nonresponsive or if talks fell apart, China could have closed its doors."
The process was ongoing and USDEC was involved from the start. Staff visited one-on-one with Chinese food safety and Ag authorities to understand the assurances they were seeking and collaborated closely with U.S. regulators to develop and revise sample certificate language.
"Special appreciation is due to USDA [U.S. Department of Agriculture] and the rest of the inter-agency team that worked dedicatedly with China to find a way to address their concerns," says McKnight.
At the same time, although there never was a market closure, the unresolved certificate issue and threat of closure loomed over U.S.-China dairy trade. That perceived risk made some buyers hesitate, opting to source some or their entire product from U.S. competitors.
USDEC estimates the uncertainty of the certificate situation depressed U.S. dairy ingredient sales by 5-10 percent and cheese sales by as much as 50 percent. The impact was considerably greater in the case of cheese given the foodservice industry's need for consistent supply and more limited interchangeability of cheeses.
"With that risk of sudden market closure removed, we have an opportunity to not only strengthen share within our current base but add significant new business," says Suber.