As NAFTA renegotiations get underway today in Washington, dairy is shaping up as major sticking point between Canada and the United States. After Chrystia Freeland, Canada’s foreign affairs minister, insisted on Monday that Canada will defend its tightly controlled approach to its dairy industry, DTN reported that Jim Mulhern, president of the National Milk Producers Federation in the United States, lambasted her for trying to have it both ways on free trade.
“For too long, Canada has relied on government controls on farm milk production to boost prices, while minimizing dairy imports to limit competition,” Mulhern said. “By comparison, the United States has slashed its government involvement in dairy markets, and relies on exporting its products to global customers to a greater degree than ever before.”
At issue is Canada’s supply management system, which sets prices, controls production, and limits imports as a way to protect farmers from market fluctuations and ensure a stable revenue stream. Critics call the system unduly protectionist, and anathema to truly free trade.
“Canada cannot be allowed to maintain a system that establishes one of the highest milk prices in the world within its borders while using world markets as a dumping ground for a huge increase in its production,” Mulhern said.
Dairy has long been a contentious issue between the two countries. In 2002, a WTO panel sided with the United States, ruling that Canada’s subsidies of its dairy industry were illegal and violated its trade obligations. This week, Mulhern and others raised the prospect of other WTO challenges if Canada doesn’t give ground.
For instance, Reuters reported that U.S. dairy officials are miffed about “a 2016 deal that allowed Canadian farmers to sell milk proteins, which are used to make cheese and yogurt, to domestic processors at a discount, curbing the flow of American imports.”
Jaime Castaneda, senior vice president for the U.S. Dairy Export Council, told Reuters that his group “will pursue fresh challenges through the World Trade Organization unless Canada stops the proteins sale.”
“If we can’t resolve this through negotiations, I believe my members will be very clear that everything is on the table,” he told Reuters, adding that such challenges against the protein sales could eventually result in rulings that force Canada to ditch its supply management program.
The Trump administration has made clear that it wants to remove barriers to U.S. agricultural exports, and has specifically called out Canada’s dairy and poultry industries, which were not part of the original NAFTA deal.