Many trade obstacles occur as the result of actions taken by central government administrations, agencies or lawmakers. But there is one sector in the United States - ‘grade A’ dairy products - where it is rather inactionby the US administration in the face of protectionist obstacles erected by individual US state authorities that has effectively shut European exporters out of the market. The main products falling in this category are yoghurt, cream, liquid milk and egg nog.

The source of the obstacle is a US regulation on how to pasteurise milk, the Pasteurised Milk Ordinance (PMO), that is very prescriptive. For example, the regulation specifies what the size the valve used in the pasteurising device must be and what the layout of the plant/creamery where the pasteurisation takes place should be. But the problem is that this regulation is enforced not by the federal government, but by each of the 50 state governments. In practice, this makes it extremely difficult for EU exporters to access the US market because they need approval in every US state they export to. The implementing regulations for the PMO are adopted by a body called the National Conference on Interstate Milk Shipments, which is made up of 50% state regulators, 25% milk farmers and 25% dairy producers. The US Food and Drug Administration (FDA) – the federal agency that oversees the process - could theoretically veto regulations that the conference adopts, but in practice it does not get involved, according to one EU official trying to remove these barriers.

FEW FIRMS GET ROUND RED TAPE

There are a limited few cases where EU producers have been able to cut through the red tape. For example, a Spanish company called Pascual, which has a long history of marketing its dairy products in Florida, has managed to continue exporting by implementing the US regulations in its plant in Spain. But this is the exact opposite of following a principle of mutual recognition, where both sides first verify and then trust in each other’s food safety regimes, without having to make them identical. Time and again, high level EU and US officials chant the mutual recognition mantra, but it does not seem to be translating in regulatory reality. Another example of a company finding a way around the rules is a Greek producer of a yoghurt product called Fagi, which has come to an arrangement with state regulators in New York and Vermont, through which it is allowed to export from Europe because it has a plant in New York state that complies with the New York regulations.

“Nobody is overtly protectionist, but it happens,” said one EU official. The FDA has been in talks with the European Commission for three years but there has been no progress. These prescriptive regulations on pasteurisation are not justified, the source argued, because there is a relatively low incidence of food poisoning in the dairy sector on both sides of the Atlantic: just 16 in the past 25 years (seven EU, nine US). For example, of the 63,000 metric tonnes of ‘grade A’ milk products that the EU imported from the US from 2003 to 2007, there were only five recalls, affecting seven tonnes. Looking at intra-EU production facilities, of the 132 million metric tonnes of ‘grade A’ dairy products produced in the same period, there were 178 recalls, affecting 5,064 tonnes, or 0.00004% of total production.

The fact that there was a recall did not, the source stressed, necessarily mean that the products recalled were contaminated - only that they did not comply with EU food safety regulations. “There were less than a dozen incidents of poisonings in the EU from ‘grade A’ products. Milk is one of the safest foods we have. Our regulatory regimes may be very different but the result in terms of consumer protection is the same,” the source said. “There are globally accepted tests certifying whether the pasteurisation process did what it was supposed to. The result - not the process - is what matters. But still the US goes through the audits line by line and focuses on the process.”

Naturally, a potential market here for European exporters is being stymied. French and Dutch dairy producers, for example, would be well positioned to market their yoghurt drinks in the US. All the while, US producers can market their dairy products like ice-cream in Europe. As with other dossiers, the EU could ultimately decide to complain about this to the Word Trade Organisation (WTO), arguing that it breaches the provisions of the WTO’s Sanitary and Phytosanitary Agreement requiring other trade partners’ equivalent food safety measures to be recognised. But for now, the EU hopes the US obstacles will be lifted without having to go through a lengthy WTO proceeding with an uncertain outcome.

“Milk is one of the safest foods we have. Our regulatory regimes may be very different but the result in terms of consumer protection is the same”