Just days into the first round of negotiations for the proposed Trans-Pacific Partnership (TPP), the U.S. is already at the center of a trade dispute that could derail the entire process.

The rift began earlier this month when, at the behest of concerned U.S. dairy farmers, 30 senators sent U.S. Trade Representative Ron Kirk a letter asking him to exclude dairy trade from the proposed trade pact.

U.S. dairy farmers claim that if restrictions on dairy imports are fully phased out during negotiations, they will be hard-pressed to compete with industry giant Fronterra, a co-operative owned by 13,000 New Zealand farmers.

The letter says that Fronterra controls 90 percent of New Zealand’s domestic milk production market and holds over a 40 percent market share in key internationally traded dairy commodities.
 
“In light of this market power, the Administration should consider whether genuine competition is possible as it proceeds with the TPP,” the letter read.

They claim that New Zealand’s anti-competitive practices in dairy farming could potentially cost U.S. producers billions of dollars.  One estimate by the National Milk Producers Federation predicts that U.S. dairy producers could lose as much as $20 billion over the first 10 years of the deal.

The letter points to the case of New Zealand imports of milk protein concentrates and casein, both of which are imported into the U.S. each year virtually tariff-free and facing no volume quotas.  New Zealand generally exports over half of the MPC’s and casein its produces domestically each year to the U.S.

An influx of imported dairy products from New Zealand could drive down U.S. milk prices, which were already hovering at 30-year lows last year.
   
“Because of the anti-competitive practices in New Zealand’s dairy industry and the extensive degree of control it wields over world dairy markets to the detriment of the U.S. dairy industry, we are deeply concerned that an expansion of U.S.-New Zealand dairy trade would further open the U.S. to these imports while providing little additional market for American farmers in New Zealand and the other Pacific countries,” the letter says. 

But New Zealand officials are pushing back against the U.S. narrative, telling on domestic radio stations that the letter amounted to “palpable nonsense.”

“The job in front of us is to get out the facts, frankly, because the facts do not support the allegations in that letter,” New Zealand Trade Minister Tim Groser told New Zealand’s National Radio.

The nation’s prime minister even suggested that New Zealand could drop out of the deal if it were to include restrictions on imports of dairy products.
 
“We want a high-quality agreement,” Prime Minister John Key said according to New Zealand media. “So coming away with an agreement that for instance carved out agriculture is unacceptable to New Zealand.”

In addition to New Zealand, the trade pact, which would be by far the largest negotiated since the North American Free Trade Agreement, is expected to include Australia, Singapore, Chile, Brunei, Peru and Vietnam.  Kirk has publicly stated that he would eventually like to see Japan, Malaysia, Peru and South Korea enter the fold.

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