As NAFTA negotiations begin on Wednesday, there’s no question dairy is one of the few agricultural issues where there’s a serious conflict between Canadian and American objectives.
On Monday, Foreign Affairs Minister Chrystia Freeland released Canada’s list of demands, with protection of supply management for dairy and poultry on the list.
Freeland made it clear during her speech and subsequent appearance before the House of Commons trade committee that she’s expecting dramatic moments during the negotiations.
On dairy, she specifically referred to domestic dairy support programs in the U.S.
“Dairy producers in the U.S. are beneficiaries of an extensive web of government supports, that is the reality as well. We remind our American partners of that fact when we enter into this conversation and that the balance of U.S.-Canada dairy trade already favours U.S. producers by a margin of five-to-one which I would call that already a pretty good deal.”
“Our government supports supply management. I think it’s very important how we frame this issue for our American partners,” she told the trade committee. “They [the Americans] have their own systems for subsidizing their dairy producers.”
Every disagreement has two sides and the U.S. perspective is quite different.
“For too long, Canada has relied on government controls on farm milk production to boost prices, while minimizing dairy imports to limit competition. 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.
“That’s why the United States and other major dairy exporting nations, including Mexico and Argentina, are so upset with Canada’s latest Class 7 pricing scheme that is designed to undercut world market prices and unfairly dump Canada’s surplus milk at the expense of the United States and other exporters. Ironically, Canada’s so-called ‘supply management’ system is failing to manage supply. Despite having no domestic market for more milk solids, the government there has sharply increased farm level production quotas, resulting in an accompanying spike of almost 300 percent in Canadian milk powder exports in 2017 so far. These exports are only made possible because Canada manipulates domestic pricing through the Class 7 subsidy scheme.
“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. While it has the right to choose its own domestic farm policies, Canada doesn’t have the right to use those policy tools to manipulate global dairy markets to the benefit of Canada’s lucrative dairy industry, and the detriment of the rest of the world’s dairy exporters.
“Regarding Minister Freeland’s comment that the United States should be grateful that it sells more dairy products to Canada than it imports, this is hardly an example of a ‘good deal’ for farmers in the United States or consumers in Canada. Much of what the United States exports to Canada is ultimately shipped back out under Canadian import for re-export programs. Canada has been refusing to share details of imports and exports under those programs, but the reality is that much of the dairy the United States ships to Canada doesn’t stay in Canada.
“The Canadian supply management program was basically ignored in 1993 when NAFTA was first negotiated. As the next generation of NAFTA arrives, here’s hoping that Canada is finally ready to have its dairy sector play by the same set of rules everyone else has been operating under for years.”
As Freeland noted, there’s likely to be some drama in the coming weeks. We’ll keep you in the loop and abreast with the dairy issue on Real Agriculture as the negotiations progress. More to come…