Economic analysis details dollar value of cheese names
The United States cheese industry and the dairy sector as a whole stand to lose billions of dollars if the European Union (EU) succeeds in restricting the use of common names of cheese by manufacturers in other countries through a provision in the proposed Trans-Atlantic Trade and Investment Partnership (TTIP).
Details of a 60-page economic analysis that took more than one year to complete were shared during an October 11 webinar sponsored by the Consortium for Common Food Names (CCFN). Consortium members include the International Dairy Foods Association, the National Milk Producers Federation, and the United States Dairy Export Council.
The analysis was conducted by seven economists working for Informa Economics IEG. The international firm has clients throughout the world with offices in the United States, Canada, Brazil, the United Kingdom, and Belgium.
Common names in jeopardy
The cheese varieties which would be most affected by the loss of their common names for manufacturers and marketers in the United States would be Parmesan, Feta, Asiago, and possibly Havarti and Gruyere, the webinar presenters stated.
According to the United States Department of Agriculture (USDA), 39 cheese plants in the country made 340 million pounds of Parmesan in 2015 while 46 plants produced 113 million pounds of Feta during the year. Consumption figures for the year were listed as 312 million pounds for Parmesan and 108 million for Feta.
With mozzarella and Cheddar accounting for the bulk of the total, cheese production in the United States for 2015 hit a record high 11.8 billion pounds. The USDA does not give a breakout production report for Havarti, Asiago, Fontina, or a number of other varieties, according to the NMPF's Peter Vitaliano.
As indicated by Informa analysts Joseph Somers and Nate Donnay during the webinar, nearly one half of the cheese production in the United States could be at risk if a widespread application of geographic indicators (GI) were in effect.
CCFN executive director Jaime Castaneda noted that such products as wine, oranges, and ham could also in jeopardy due to GI restrictions on name use. In many cases, the names, including Parmesan and Feta, have been used for centuries and have in effect become generic, he argued.
Castaneda explained that the GI designation is used appropriately when it recognizes the geographic traits and character that are due to production in a certain region. He cited Idaho potatoes and Roquefort cheese (in France) as examples.
Where those conditions do not apply, GI restrictions are not proper, Castaneda argued. He credited United States Department of Agriculture Secretary Tom Vilsack for once asking “Where is Feta?”
For creating its economic analysis, Informa's study focused on the production of Parmesan cheese in Germany and Feta in Denmark. Castaneda noted that Denmark is applying for a GI designation for Havarti – a cheese made by 40 plants in a dozen states in the United States – and that Switzerland might apply for Gruyere.
During the upcoming 10 years, the Informa analysis predicted the possibility of a $24.6 billion cut in farmgate income for dairy farmers and an overall $59 billion loss for the entire dairy sector infrastructure in the United States. At worst, it would shave $1.77 per hundred from the milk price, resulting in less than an breakeven income for dairy farmers during 6 of the next 10 years, the study indicated.
The anticipated cutback in domestic sales of cheese because of new product names and limits on exports due to GI provisions would result in the potential reduction of 852,000 cows or 9 percent in the United States dairy and a 15 percent loss of income for dairy farmers, the study warned.
Cheese sector impact
For the cheese sector, the initial minimum impact would reduce cheese consumption by 217 million pounds per year while the delayed effect could cut consumption by up to 860 million pounds annually, the Informa's report suggested.
The worst case scenario would reduce the annual cheese market by between 578 million pounds initially to as much as 2.3 billion pounds in the longer term, the report pointed out. It also cited the likely loss of between $10.1 and $23.2 billion in the gross domestic product during the initial three-year period and the potential loss of 76,000 to 175,000 jobs.
“We would suffer greatly with an EU exclusive use of common names for cheese,” BelGioioso Cheese founder and chief executive officer Errico Auricchio told the webinar audience. “We'd be forced to abandon markets or even face closure.”
“We simply must not let this happen,” Auricchio stated. He pointed out that his family has been engaged in making Italian cheeses in its home country for more than 100 years. Starting in 1979, he established a new company which today makes 28 varieties of cheese in eight facilities centered around Green Bay in northeast Wisconsin.
While NMPF's president and chief executive officer Jim Mulhern noted that a trade agreement on GI between the EU and South Korea is limiting food exports by other nations to that Southeast Asian country, Castaneda emphasized that GI restrictions on common food names would not affect only exporters.
Within the United States, the institution of GI restrictions to common name products emanating from the EU's 28 countries would require a rebranding or renaming of those foods, Informa's Joseph Somers pointed out. He warned that consumer unfamiliarity with the newly named food items would hurt sales.
USDEC's president Tom Suber argued that manufacturers and marketers ought to compete on “quality, service, and price” rather than on trade barriers based on the product names that do not merit a GI designation. “This is a real world issue – not just a theory,” Mulhern remarked.
Mulhern said that CCFN does not oppose the legitimate use of GI designations but that it needs to combat the EU's current efforts. Suber suggested that food producers, manufacturers, and marketers in the United States consider creating some GI designations of their own.
Mulhern commended Sen. Orrin Hatch (R - -Utah) and Cong. Robert Brady (D – PA) for their efforts in Congress to protect the common names from GI designations by the EU. He noted that their letter referred to “a pattern of hostage taking” by the EU on the issue.
Castaneda is concerned about how Canada conceded on the GI issue on its Comprehensive Economy and Trade Agreement (CETA) with the EU but noted that it has not yet been implemented. A very recent report indicated that a region in Belgium is opposing CETA.
There is a possibility that CCFN will file a formal complaint with the World Trade Organization on the issue, Castaneda stated. In the meantime, he hopes that negotiators representing the United States will insist on protecting the common names of cheese and other food products rather than offering them as a concession at the last-minute in order to reach an agreement on TTIP.
To a questioner on the webinar, Castaneda declared that there is no place for compromise or a middle ground on common names in the provisions of a trade agreement. “There would be a huge cost for us if we could not use the common names,” Auricchio commented.
“The use of common names helps to sell cheese,” Castaneda concluded. “Buyers look for cheese with a certain name.”