Proposed Expansion of Dairy Import Fee Debated

By FREDERIC J FROMMER

WASHINGTON — Big-name U.S. food companies are teaming up with cheese importers, Alaska, Hawaii, Puerto Rico, New Zealand and the European Union in trying to block the expansion of dairy promotion assessments beyond the 48 contiguous states.

The Bush administration never implemented the dairy import assessment approved by Congress in 2002, as the Agriculture Department concluded the fees could create the appearance of favorable treatment because Alaska, Hawaii and Puerto Rico are exempt.

This year, the chairman of the House Agriculture Committee, Rep. Collin Peterson, D-Minn., inserted language into the 2007 farm bill extending the mandatory fee to dairy farmers in those states and Caribbean territory. That would remove the trade hurdle and pave the way for fees on imports, he argued.

The House passed the farm bill in July, but it awaits action in the Senate.

U.S. dairy farmers pay 15 cents per 100 pounds of milk sold for the promotions. Cheese importers would pay around 1.5 cents a pound because it takes about 10 pounds of milk to make a pound of cheese. The promotions pay for things like the “3-A-Day” marketing campaign, which encourages people to consume three servings of milk, cheese or yogurt a day.

The Senate version of the farm bill does not include the dairy imports language and eight senators — including the four from Alaska and Hawaii — sent a letter to Senate Agriculture Committee Chairman Tom Harkin, D-Iowa, urging rejection of the House language. Last year, Hawaii and Alaska ranked 48th and 50th in dairy production, respectively.

The senators said dairy production was declining in the two states and “any further reduction in these farmers’ incomes could have a devastating effect.” They also argued it was unfair to extend the fees to dairy imports, saying the program doesn’t promote imported cheeses or dairy ingredients, such as milk proteins. Separately, the governor of Puerto Rico, Anibal Acevedo Vila, thanked Harkin for leaving out the language.

“Production costs and milk and dairy product prices in our states are already among the most expensive in the country,” said Sen. Ted Stevens, R-Alaska. “The ‘milk tax’ would only drive these higher and could end dairy production altogether.”

But senators from large dairy-producing states such as Wisconsin and California are pushing for the House provision. Thirteen senators, led by Russ Feingold, D-Wis., called on the Senate to end the “freeloading of imported dairy products.”

“America’s dairy farmers feel that it’s a fundamental issue of fairness and only want everyone — including domestic production and imported production — to be treated equally,” said Chris Galen, a spokesman for the National Milk Producers Federation, which has been lobbying Congress to expand the dairy assessments to imports.

Pete Kappelman, a dairy farmer from Two Rivers Wis., and chairman of Land O’Lakes, made the same argument in a telephone interview.

“The imported products are riding free on the promotional efforts,” he said, calling the House proposal “a technical fix” to get the Agriculture Department to start collecting the fees enacted in 2002.

Cheese importers and U.S. food companies that use imported dairy products as ingredients have formed the Alliance for Fair Dairy Promotion to lobby against the assessment. The coalition includes companies such as ConAgra Foods, General Mills, Kraft Foods and Nestle, as well as groups such as the Cheese Importers Association of America, the National Taxpayers Union and the International Dairy Foods Association.

Originally published by FREDERIC J. FROMMER Associated Press.

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