Testimony of The Honorable Mark Dayton, United States Senator from Minnesota Before the U.S. International Trade Commission
Chairman Okun and Members of the Commission: I am Mark Dayton, United States Senator from the State of Minnesota. Thank you for this opportunity to address the serious problem of unrestricted dairy imports and their devastating effects on Minnesota's dairy producers.
Your Commission's investigation into imports of milk protein concentrate, or MPC, is not the first inquiry into this matter. In 2001, the U.S. General Accounting Office published a report on the very same issue. The GAO Report concluded that imports of MPC surged from 805 metric tons in 1990 to 53,000 metric tons in 2000, an increase of over 6500 percent in a single decade. How was this flood of excess product, with its terrible undermining of U.S. milk prices, allowed to occur?
The technology to produce MPC was not widely used, when the United States negotiated the General Agreement on Tariffs and Trade (GATT) in 1994. Prior to GATT, the United States imposed strict quotas on dairy imports such as cheese, butter, and nonfat dry milk, because large amounts of imports would have undermined our domestic dairy price support program. Under GATT, the United States agreed to convert its dairy quotas to tariff-rate quotas. Our Government did not negotiate those same restrictions on MPC, because it was then a relatively new product. By that oversight, a huge loophole was created, which allowed a product, not covered by existing trade agreements, to enter the U.S. market without restraint. The effect of this loophole was documented by the GAO Report. MPC imports doubled between 1998 and 1999 alone.
The Report prompted 32 Senators, including myself, to offer legislation closing that loophole during the 107th Session of Congress. At the beginning of the 108th Session, Senator Larry Craig from Idaho and I introduced "The Milk Import Tariff Equity Act." 30 other Senators are cosponsoring our legislation. Our bill would close the loophole in U.S. trade law by regulating MPC imports as other dairy imports are regulated: establish a tariff-rate quota on MPC. The bill would close a similar loophole for casein, which is used for food or animal feed, while allowing unrestricted imports of casein for making glues and for other industrial purposes. The bill also directs the U.S. Customs Service to establish tariff-rate quotas on nonindustrial uses of casein and milk protein concentrates.
The Craig-Dayton bill establishes two separate tariff-rate quotas. The first TRQ would allow 54,051 metric tons of casein imports with protein levels of 90 percent or higher to enter the United States under chapter 35 of the Harmonized Tariff Schedule of the United States. The second TRQ would allow 15,818 metric tons of milk protein concentrates with lower protein content levels, which enter under chapter 4 of the tariff schedule. These figures represent 50 percent of the average level of imports for these products from 1995 to 2000. This is the same methodology used in setting tariff-rate quotas on other dairy products during the Uruguay Round of GATT.
Again, those tariff-rate quotas limit only the imports of casein and milk protein concentrates used for human or animal consumption.
On May 13th of this year, Senator Chuck Grassley, Chairman of the Senate Finance Committee, asked this Commission to conduct an investigation under section 332 of the Tariff Act of 1930 regarding U.S. market conditions for milk proteins. I understand that you have been asked for your Report by May 13, 2004. I respectfully ask you to reset this deadline. Frankly, this Report appears to me to be a way to delay, or even prevent, action on this urgent problem this year. The GAO Report documented clearly the devastating effect of those unrestricted imports on the U.S. markets and prices. Now is the time for Congress to act.
I hope the International Trade Commission's report will recognize the alarming surge in milk protein imports and the damaging effect it has had on domestic dairy producers.