This reflects dairy's slow and difficult emergence internationally, as one of the most protected and subsidized industries around the world. Precisely because world trade is so distorted, the China agreement is extremely important. It provides the opportunity for greater market access into China, but it also provides a precedent for further reform in global trade. For instance, the EU, the world's largest dairy market, is able under its WTO commitments to impose tariffs and cumbersome allocation procedures for import licenses that limit U.S. dairy exports. Canada, our largest trading partner just to the north, and with whom the U.S. has concluded three major trade agreements in the recent past, is similarly able to impose tariffs on U.S. dairy products between 200 and 300 percent.
Export subsidies are still very common in world dairy trade.
The WTO agriculture agreement will still permit almost 60 percent of projected dairy world trade to be subsidized when the agreement is fully phased in later this year. The distribution of these subsidy allowances is highly skewed. By entering the WTO, China is making significant concessions, in particular export subsidies and tariffs. Ideally, China would like to see the elimination of export subsidies and the reduction of tariffs within the WTO negotiations. Therefore, having China in the WTO will likely help the U.S. in pressuring countries like the EU and others to eliminate export subsidies and increase market access.