U.S. Dairy Industry Fighting Self-Inflicted Injury as GI Battle Heats Up

by Jim Eichstadt But when President Obama announced plans for a new transatlantic trade deal with Europe in his 2013 state of the union address, EU officials Top to bottom … the U.S. dairy industry has reacted with anger and alarm in Brussels jumped at the chance to play the dairy GI card. Europe’s sud - at recent European Union (EU) threats to claim exclusive rights to many com - den move to restrict cheese names blindsided many in the U.S. dairy indus - mon cheese names, including Parmesan, Havarti, Swiss and Gouda. Such try who were unfamiliar with the import assessment fight. cheeses are produced, marketed and consumed throughout the world. The notion of U.S. cheese plants and cheese marketers being prohibited from selling their Clear warnings from DTC’s Castillo in 2003 wares bearing these traditional names is an absurdity of the “Free Trade” process. Mario Castillo, who led the fight against the dairy import promotion If successful, the EU’s threat poses obvious challenges to U.S. cheese assessment, repeatedly warned about the assessment’s unintended consequences makers. Less obvious: the fact that this emerging trade dispute was original - beginning in 2001. Castillo, a former chief of staff of the U.S. House Ag Com - ly provoked by some of the U.S. dairy groups now crying foul at the Euro - mittee, serves as executive director of the Dairy Trade Coalition. Some of the pean demands. unintended consequences Castillo cited more than a decade ago included the EU trade negotiators are demanding the right to prohibit the use of many threat of European retaliation on dairy GIs. “Geographic Indicators” (GIs, or place-based product names) on cheeses and Noting the strength of domestic specialty cheese sales in the U.S., Castil - other foods produced outside the specific European regions where these tradi - lo warned of the coming dairy GI fight in a letter to the editor published July 11, tional names originated. Such proposed “claw back” restrictions could bar a 2003 in Cheese Reporter : wide array of dairy products produced and sold for decades with common, “But how long will American cheese makers be able to continue using the generic names in the U.S. and other markets outside Europe. familiar names propelling the growth of the US specialty cheese market? … Familiar cheeses produced in the U.S., including Asiago, Brie, Edam, Feta, According to our colleague on assignment in Geneva, the Europeans have been Gouda, Mozzarella, Parmesan, Romano – and potentially many more – could no quietly discussing the possibility of seeking protection for geographical indica - longer be labeled with those names if the EU prevails at the bilateral Transat - tors (Gis) beyond European wines, spirits, and related products. Apparently, the lantic Trade and Investment Partnership (T-TIP) negotiations now underway Europeans are preparing to walk into the upcoming World Trade Organization with the U.S. GI restrictions could create huge marketing problems for U.S. Ministerial meeting in Cancun with stealth weapons aimed at the very heart of cheese makers – who would be forced to use unfamiliar names for their cheeses. the US dairy industry – those segments of our cheese market with the greatest And just imagine the huge confusion for consumers at the supermarket the growth potential,” Castillo said. supermarket dairy case, unable to find their favorite Parmesan or muenster. The outcome of this food fight is subject to ongoing negotiations at bilateral trade NMPF acknowledged foreign cheese names in 2004 talks between the U.S. and EU. National Milk spokesman Chris Galen acknowledged the issue of Euro - (A note from the author: I first encountered the dairy GI issue in early pean cheese names in a 2004 interview on Dairyline, a syndicated national radio 1992, as I was filing an Emmental cheese price undercutting complaint at program: “If we’re promoting mozzarella, feta, cheddar, gorgonzola, those are USDA against Switzerland. The Swiss agricultural attaché angrily confronted all foreign cheeses to begin with, at least the names are …” Galen said. (See me at a farm meeting in Des Moines, Iowa, threatening official action to block sidebar story below.) the use of “Swiss”-related names on cheeses produced in the U.S. if I didn’t drop the complaint. I ignored Switzerland’s threat and went on to win the price undercutting complaint – along with a similar complaint against several Euro - NMPF Acknowledged Foreign pean countries in 1995.) Cheese Name Issue in 2004 Import assessment provoked fight National Milk Producers Federation and other industry groups sowed the by Jim Eichstadt seeds for the European cheese name fight by politicking for the U.S. dairy National Milk Producers Federation continued to push for implemen - import promotion assessment starting in 2001. The Dairy Trade Coalition tation of the dairy import promotion assessment in 2004, even as its chief (DTC) warned NMPF and its allies during the 2002 Farm Bill debate that the motor-mouth publicly acknowledged the role of European cheese names in import assessment would have unintended negative consequences for U.S. dairy the assessment debate. farmers. The protracted and bitter battle over the dairy import promotion assess - Chris Galen, NMPF vice president of communications, made refer - ment legislation – which was first passed in 2002, heavily modified in 2008, and ence to foreign cheese names in a syndicated national radio program, long eventually implemented in 2011 – set the stage for the current dispute over pro - after National Milk had been warned that the import assessment could pro - tected GI cheese names, as the DTC predicted. (See below.) voke European retaliation on the use of their traditional cheese names in The European demands for GI restrictions come as the Obama administra - the U.S. tion is pushing to expand trade with the European Union under the T-TIP talks “If we’re promoting Mozzarella, Feta, Cheddar, Gorgonzola, those which began July 8, 2013 in Washington, DC. The GI restrictions could cover a are all foreign cheeses to begin with, at least the names are, so the point large and growing list of cheese varieties and other food products eligible for is, we’re in no danger of having the program be hijacked by the rela - protected status within EU’s 28 member countries. The fourth round of the U.S.- tively small amount of representation that would come from imports,” EU talks took place March 10-14 in Brussels, Belgium. In Wisconsin, execu - Galen said on Lee Mielke’s July 29, 2004 Dairyline radio program. tives of firms that process meats worry that they might lose the right to label a The “foreign cheeses” Galen referred to are central to current Euro - “bratwurst” as bratwurst. After all, as EU logic follows, the term “bratwurst” pean efforts to restrict U.S. cheese makers from using common cheese has Germanic roots dating back centuries. names such as Parmesan, Asiago, and Havarti that the European Union is The EU proposal would allow protected GI names to be used only on prod - now seeking to protect as Geographical Indicators (GIs) GIs. ucts originating from within the specified regions, e.g., Parmesan cheese from Galen’s comments came more than two years after the import assess - Parma, Italy; Feta cheese from Greece; and Havarti cheese from Denmark. ment was signed into law as part of the 2002 Farm Bill. National Milk Long-standing GI restrictions for wines and spirits allow the name Champagne, ignored repeated warnings of European trade retaliation on dairy GIs as it for example, to be used only on sparkling wines produced in a specific region pushed for implementation of the import assessment for another seven near Reims, France. years, until USDA’s final rule took effect April 1, 2011.

Why the sudden fuss over GIs? Pedrozo cites failed dairy leadership Dairy has been the exception to the GI rule, until recently. Most of the Events are now unfolding much as the DTC predicted in 2003. Tim Pedro - now-disputed names have become almost generic after decades of use on zo, a farmstead cheese maker and DTC member from Orland, California, active - cheeses produced worldwide. Immigrants from Italy, Switzerland, and other ly fought the import promotion assessment. European countries have produced their traditional, Old World-style cheeses “National Milk is largely responsible for the GI mess. Leaders of big co- in the U.S. without challenge since the early 1900s. Among those immigrants ops ignored every warning during the nine years it took to pass and implement stunned by the European GI threat is Errico Auricchio, who moved to the U.S. the import promotion assessment. One Wisconsin Cheese Makers Association from Italy in 1979. His firm, Bel Gioioso Cheese of Green Bay, Wisconsin, official also dismissed the DTC’s warnings on the import assessment, and now has been producing fine Italian-style cheeses in the U.S. for 30 years. (See claims to be shocked that the Europeans have kept their promise to retaliate. sidebar story on page 9.) Unfortunately, dairy farmers and cheese makers have been very poorly repre - More recently, big European dairy processors have gotten in on the spe - sented on the import assessment issue,” Pedrozo said. cialty cheese act in a big way, ramping up production of the disputed varieties “Not only did the import assessment fiasco undermine many common at their plants in the U.S. Lactalis, a French-owned multinational firm, produces cheese names, it also let dairy importers hijack our REAL® Seal for promoting Brie, Camembert, Feta, and Italian-type cheeses in Wisconsin, California, and imported cheeses and milk proteins,” said Pedrozo, who has been involved in Idaho. Arla, a dairy co-op covering Denmark, Sweden, and Germany, produces California dairy promotion programs for 18 years. Havarti cheese in Wisconsin. Glanbia, headquartered in Ireland, produces moz - Pedrozo, who chairs the California Manufacturing Milk Advisory Board, also zarella cheese in Idaho. saw the threat of European GI retaliation coming more than a decade ago. To pre - pare for such a marketing disaster, Pedrozo proactively developed unique, propri - Prior to 2000, the EU largely tolerated the widespread use of its cheese etary names (“Northern Gold,” “Tipsy Cow,” “Black Butte Reserve,” and “Blondie’s names outside of Europe. That indifference changed with a vengeance, Best”) for marketing his family’s line of award-winning farmstead cheeses. however, during the past decade, when the bitter dairy import assessment fight brought European tempers to the boiling point. The collapse of the Non-tariff trade barrier? World Trade Organization Doha Round talks in the mid-2000s temporari - Concerns about the potential impact of protected cheese names were high - ly delayed European opportunities for retaliation on the import assessment. lighted at a Madison International Trade Assn. T-TIP forum held Feb. 12, 2014 in The Milkweed 8 — • April 2014 Continued on page 10 NMPF’s “REAL® Seal” User Fees Sparking Complaints

by Pete Hardin promotion legislation – was the mandate to pro - Costs? Appendix A of the “REAL® SEAL Attempted revival of dairy’s “REAL® Seal” mote “fluid milk and dairy products produced in CERTIFIED USER AGREEMENT” (see below) by the National Milk Producers Assn. (NMPF) is the United States.” details the costs associated with using the dairy icon. generating strong criticism from dairy product Why did NMPF lead the political charge to The Milkweed reproduces the cost-structure marketers. The primary basis for those gripes is disallow “domestic content” messages for the table below. Our reading indicates that every sin - hefty, annual user-fees now sought for using the “REAL® Seal?” NMPF’s agenda called for gle product, by weight, must be separately regis - “REAL® Seal” on packaging. assessing the promotion check-off fee on dairy tered and paid for by dairy marketers. Example: Since the early 1980s, the “REAL® Seal” imports. But once dairy importers were charged If a cheese plant were selling both 1-lb. and 2- had been available at no charge for use on con - fees, they earned the right to “sit at the table.” lb. bags of cheese curds – in 10 different flavors – sumer packages. In the early 1980s, the “REAL® A key element appealing to dairy importers the cheese plant would have to pay registration fees Seal” grew to national status from its California when asked to pay the promotion fees was ability for 20 different products if the marketer wanted to origins. to use the “REAL® Seal” on their imported dairy affix the “REAL® Seal” to all of its packaging. The “REAL® Seal” – trademark has histori - products. Previously, the “REAL® Seal” was If that cheese plant sold no other dairy prod - cally been a red droplet with the word “REAL®” restricted for promoting milk and dairy products ucts bearing the “REAL® Seal,” the cheese plant inside a white drop that represents milk. In the produced in the United States. would be obligated to pay a whopping $6,000 1980s, national dairy promotion groups invested USDA and Congress took nine years working annual fee. (20 products x $300 per “REAL® significantly to promote the “REAL® Seal” to out the “Free Trade” intricacies needed to legally Seal-certified products.”) American consumers. That icon grew status as one implement the dairy promotion assessment levied Costs are stiff, particularly for small- and of the, best-recognized advertising icons in the U.S. on dairy imports – which began April 1, 2011. For medium-sized dairy processors. Remember – NMPF has “modernized” the “REAL® Seal” the two most recently completed calendar years, the these costs are annual fees. Additional costs are logo – making a cartoon-like figure with a face, hands, import assessment has generated a piddling $3.5 associated with changing packaging to adapt the and feet emanating from the traditional red droplet. million annually. That figure is a hair more than 1% new “DairyUS” logo. NMPF has dubbed the new cartoon figure “DairyUS” of the total $.15/cwt. mandatory promotion assess - Thus, after years … indeed decades … of – supposedly to symbolize that only U.S.-produced ment charged to all U.S. milk producers. The total neglect, NMPF wants to revive the “REAL® milk and dairy products are used in packages bearing amount generated by the national dairy producers’ Seal.” This situation is similar to turning over an the “REAL® Seal.” promotion assessment is $300 million. ($.15/cwt x abused child to the custody of the abuser. Adding Previously, costs of administering the 200 billion lbs. of U.S. milk production.) sky-high annual user fees is sparking serious “REAL® Seal” came from funds generated by the resentment in the dairy industry. farmer-funded, mandatory dairy promotion check- Over the past decade, plus, NMPF politically NMPF’s stewardship of the “REAL® Seal” off. But now, resentment is building against high “neutered” the domestic content promotion man - is off to a rocky start. Both fluid milk and cheese user-fees assessed for an advertising icon that’s date of the original legislation. And dairy promo - marketers are facing painful net margins – due to, been available at no cost for over three decades. tion groups – chockfull of directors representing respectively, declining fluid milk sales and high Common opinions may be summed up by the ques - NMPF cooperatives – failed to finance the costs for milk processed into cheese. NMPF has tion: “Why should they pay for something that “REAL® Seal” beyond a pittance. Now, NMPF picked the wrong time to knock on dairy proces - they’ve been getting for free for 30-plus years?” wants to reverse the “REAL® Seal’s” neutered sta - sors’ doors, asking for extortionate sums of money. tus with “DairyUS” (presuming DairyUS is a male), REAL® Seal a scruffy political football hoping that “DairyUS” will sire greater awareness “Old REAL® Seal” Users??? of U.S.-produced milk and dairy products. In the past year, the dairy promotion leaders What about “historic” users of the “REAL® NMPF will now enforce domestic content at Dairy Management, Inc. (DMI) turned over Seal” who’ve had the icon on their dairy packag - rules – only for “Made in the U.S.” milk and dairy operation of the “REAL® Seal” program to ing for decades? Do firms that want to continue ingredients. As detailed in the January 2014 issue of NMPF. The “REAL® Seal” received little fund - use of the “old” dairy icon have to pay the exorbi - , that move is possibly illegal. Why? ing from the dairy promotion moguls for the past The Milkweed tant annual fees also? Because Dairy Management, Inc. (or some sub - two decades. The dairy promotion geniuses had sidiary thereof) retains ownership of the “REAL® allowed the once highly-recognized symbol of The Milkweed posed that question in a tele - Seal” and USDA rules disallow dairy check-off domestic dairy purity to languish. phone message to the “REAL® Seal” administra - funds to be used for domestic dairy product promo - NMPF effectively “neutered” the “REAL® tor. No reply ... tion. DMI receives dairy check-off funds. Seal” with proposals originally included in the 2002 federal farm legislation that effectively pro - hibited the national dairy promotion program from Cost hammer identifying the country of origin of promoted small/medium RE AL® Sea l Annu al Fee Stru ctur e products. (The 2002 Farm Bill amended Section marketers … 110 of the 1983 enabling legislation by deleting NMPF has con - Numbe r of the words “products produced in the United tracted Carol O’Connell 100 + 25 -99 1-24 States” and adding the words “and on imported of Cross Plains, Wiscon - products ce rtified dairy products.” See graphic on page 1.) U.S. dairy sin to administer the Annua l fee pe r farmers’ checkoff dollars – and the checkoff-fund - revised “REAL® Seal.” $200 .00 $250 .00 $300 .00 ed REAL® Seal – could no longer be used to pro - For more information, product ce rtified mote U.S. dairy products. interested persons may Eff ective July 1, 201 3 The “founding fathers’” original intent – go to the following Web Source: www.http://realseal.com/sites/default/files/User-Agreement-072613.pdf back in the 1983 legislation that created the dairy site: REALseal.com U.S. Dairy Industry Fighting Self-Inflicted Injury as GI Battle Heats Up, con’t Continued from page 8 product GIs and lists many cheese names potential - them to the European countries,” according to Dairy ly threatened by GI restrictions. Farmers of Canada, which notes that “cheese mak - Madison, Wisconsin. Shawna Morris, vice president The alliance’s Web site conveniently omits ers wanting to produce cheeses on the GI list would of trade policy for the U.S. Dairy Export Council any reference to the dairy import assessment. have to add a qualifier (ex: Asiago-like).” (See (USDEC) said the threatened European GI restric - CCFN’s executive director is Jaime Casteneda, who www.dairyfarmers.ca.) tions pose a potentially huge problem for the dairy serves as “senior vice president, strategic initiatives Goodness … what if “beer” is on the EU’s list industry in Wisconsin, the nation’s top cheese-pro - & trade policy” for National Milk and also works of 1,000 or so “Geographic Indicators” that those ducing state. GI restrictions would be a significant for USDEC as “senior vice president, trade policy.” negotiators want to deny use of by U.S. firms in the “non-tariff trade barrier” and could set a bad prece - CCFN is headquartered at 2101 Wilson Blvd. Suite evolving T-TIP negotiations. What would a poor dent for future free-trade agreements, Morris said. 400 Arlington, VA, the same address shared by Wisconsin dairy farmer do if he went to the nearby USDEC, a membership group funded in part NMPF and USDEC. It’s hard to tell which hat these crossroads tavern and ordered a Leinenkugel , by U.S. dairy farmers’ promotion dollars, has close BEER guys are wearing on a given day. a couple Johnsonville and a side ties to NMPF. The two organizations share office BRATWURSTS, order of smeared with space and staff. Many National Milk directors serve FRENCH FRIES PRO - on the USDEC board. Morris and her colleagues at Dairy GIs in EU-Canada trade pact VOLONE? What if the EU took its argument to NMPF should be well-aware of National Milk’s The fight over European cheese naming rights the logical extreme and banned the use of Euro - past efforts that created the dairy import promotion has spilled across the border to Canada. The bilater - pean family surnames in the U.S.? Absurd! assessment. al Comprehensive Economic and Trade Agreement USDEC and NMPF are key members of the reached October 2013 between Canada and the EU Jim Eichstadt was employed by one of the Consortium for Common Food Names (CCFN), an includes provisions on some dairy GIs. “Five of Dairy Trade Coalition’s founding member organi - alliance concerned about GI restrictions. CCFN’s these relate to cheeses that are made in Canada. zations and represented U.S. dairy farmers on the Web site (www.commonfoodnames.com) notes that Cheese makers who currently make cheeses like USDA/USTR Agricultural Policy Advisory Commit - the EU has currently registered about 1,000 food Feta, Asiago and Gorgonzola in Canada will be able tee for Trade at the WTO. Eichstadt also served as to continue to call their cheeses as such, with some a consultant to the Aegis Group during the dairy 10 — The Milkweed • April 2014 conditions. However, they will never be able to sell import assessment battle in Congress.