California Forum

Got milk? Ending NAFTA could sour California’s booming dairy industry

Milk produced by California cows is a multibillion-dollar business, thanks in part to NAFTA exports. A trade war with Mexico could harm California's dairy industry.
Milk produced by California cows is a multibillion-dollar business, thanks in part to NAFTA exports. A trade war with Mexico could harm California's dairy industry. Fresno Bee

What California industry directly employs more than 104,000 people with a ripple effect that supports an additional 285,000 full-time jobs in retail, construction and other sectors?

If you said dairy, reward yourself with a cold glass of milk.

But don’t celebrate long. Our success is global and fragile. Seemingly small actions giving the European Union and other U.S. competitors the upper hand can inflict damage on the California economy.

Conversely, smart trade deals remove barriers and spur growth. Under the North American Free Trade Agreement, dairy exports to Mexico are up 885 percent (to $1.2 billion in 2016).

The dairy industry supports President Donald Trump’s effort to modernize a trade deal created when Google wasn’t even a domain name, much less a verb. But walking away from NAFTA as threatened would damage a dairy industry that employs far more Californians than even the tech giant in Palo Alto.

That’s not a criticism. Silicon Valley creates prosperity, but so does dairy and the rest of California agriculture. Our jobs are dispersed throughout the state, helping rural communities.

Dairy’s economic impact can be seen in a new study by the International Dairy Foods Association, an industry trade group. It finds that, in addition to full-time jobs, dairy delivers California $4.8 billion in business tax revenue and creates $97.9 billion in economic impact when counting the ripple effect.

Dairy’s future looks promising, thanks in large part to exports. California ports are a vital gateway.

Take, for example, the milk powder securely packed into bags at Dairy Farmers of America plants in Fort Morgan, Colo., and Fallon, Nev. The powder is trucked through California to the Port of Oakland. Once there, it’s loaded into cargo containers stacked like multicolored Legos. Ships transport the containers over the Pacific Ocean to destinations such as China, Singapore and Korea.

“The export supply chain is vital in getting products from U.S. farms to the tables of consumers around the world,” says Elena Asher, assistant director of export logistics at DFA. “In the process, tens of thousands of jobs are created and billions of dollars in economic activity generated.”

It wasn’t long ago that we kept almost all our milk in this country. Today, nearly one out of seven gallons of U.S. milk ends up in products overseas. Our exporters just set a goal to increase that to one out of five gallons within three to five years.

The goal is ambitious and doable.

Middle-class populations are swelling in markets like Southeast Asia, consuming more dairy products than their own countries can produce. We have the land, cows, technology, know-how and safety record to seize that opportunity.

Why are trade agreements so important? Among other things, they determine the taxes and duties, called tariffs, imposed on products coming into a country. NAFTA was historic because it removed tariff barriers, opening doors between the United States, Mexico and Canada.

This is the time to mend NAFTA, not end NAFTA. California jobs are at stake.

Tom Vilsack is a former Iowa governor and U.S. Agriculture Secretary who now serves as CEO and president of the U.S. Dairy Export Council. Reach him at @USDairyExporter.