International dairy trade absorbs only about 5 percent of globally produced cow milk. The trade is primarily in major manufactured dairy products--butter, cheese, and dry milk powders--with some trade in fluid milk products, ice cream, yogurt, and dry whey products.
The United States has not consistently been a major exporter of dairy products. Historically, sporadic unsubsidized exports of butter and nonfat dry milk powder have taken place, but more commonly, some subsidy has been required. In 2007-08, the United States was able to take advantage of significant export opportunities due to tighter global stocks, drought-induced production declines in Oceania, rising demand in foreign countries, and the weaker dollar in 2007. The United States is an important importer of relatively large (although mostly fixed) amounts of cheese.
Before the Uruguay Round Agreement on Agriculture, the United States employed explicit dairy product import quotas to shield the domestic dairy industry and Federal price support programs from international dairy markets. After the agreement, as a member of the World Trade Organization (WTO), the United States, along with many other dairy-trading countries, established tariff rate quotas (TRQs) for dairy products. The TRQs allow imports at very low tariffs up to fixed amounts. Any additional imports are subject to very high tariffs. Many of the individual TRQs are administered through licenses for imports of specific products from specific countries or regions.
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