Trudeau confirms flexibility on dairy in NAFTA talks, but what does that mean?



The Canadian government was on the media offensive this past weekend, after the U.S. administration applied steel and aluminum tariffs to imports from Canada while justifying the move as a national security issue.

“What you are saying to us and all of your NATO allies is that we somehow represent a national security threat to the United States,” Foreign Affairs Minister Chrystia Freeland said on CNN’s State of the Union on Sunday. “Seriously? Do you really believe that Canada, that your NATO allies, represent a national security threat?”

Meanwhile, Prime Minister Justin Trudeau was on NBC’s Meet the Press, where he reiterated that the U.S. tariffs are “insulting,” while describing Canada as an “even-tempered and strong” moose when asked about the U.S. being the elephant in the trade relationship. (Watch the entire interview here.)

Trudeau was also asked about NAFTA renegotiation, which prompted a reference to Canada’s supply management pricing system for dairy that is worth highlighting, as well as an explanation for why the sunset clause the U.S. wants is a non-starter for Canada.

Here’s part of the exchange with host Chuck Todd:

CHUCK TODD: Let me go to NAFTA, do you understand what the United States wants in this renegotiation?

JUSTIN TRUDEAU: I think they want a better deal on their auto sector from Mexico, and I think they want more access on certain agriculture products like dairy to Canada.

CHUCK TODD: Are you willing to give them that?

JUSTIN TRUDEAU: We—We’re moving towards, you know, flexibility in those areas that I thought was very, very promising. But the United States want a sunset clause in NAFTA, which makes no sense. You don’t sign a trade deal that automatically expires every five years.

CHUCK TODD: That’s a non-starter for you?

JUSTIN TRUDEAU: That’s a non-start— well, you think about—

CHUCK TODD: You won’t be at the table if that’s on the table?

JUSTIN TRUDEAU: No. You can think about investment. What company is going to want to invest in Canada if, five years later, there might not be a trade deal with the United States? And that, quite frankly, is probably part of the whole point of the United States to say, “Well no, we don’t want anyone investing in our NAFTA partners. We want people investing in us.” But that’s not the way trade works…

Trudeau’s comment on dairy raises the follow-up question: what does he mean by “moving towards flexibility”?

The Canadian dairy industry is expressing concern about Trudeau’s word choice in the NBC interview, as Dairy Farmers of Canada has been calling for no concessions on dairy imports in NAFTA.

“These comments are deeply troubling for our dairy farmers, as you and your government’s representatives have repeatedly stated that you support the supply management system and our sector,” says DFC president Pierre Lampron, in an open letter written to Trudeau on Monday.

Canada has already traded away a small percentage of dairy market access in the Canada-EU trade deal and the CPTPP, which if the U.S. had remained a member, would have resulted in new access for American dairy exports, as it opens up 3.25 percent of the Canadian market.

U.S. dairy interests, on the other hand, will welcome the Prime Minister showing a willingness to compromise on dairy, but the precedent set in other trade deals shows it likely won’t be to the extent the U.S. industry would like to see. Anybody hoping for and expecting market access exceeding 10 percent will likely be disappointed. And a scenario where Canada would agree to ending the supply management system is much less likely.

There have been rumblings from Washington in recent weeks that progress has been made on a deal regarding dairy with Canada, but like all the other pieces of NAFTA, it’s conditional on the three countries seeing eye-to-eye on some of the bigger issues, including the sunset clause and auto rules of origin. Trudeau’s comments two weeks ago about a new NAFTA deal being “very close” would support this narrative.

As for the “moving towards flexibility” comment on NBC, it shows President Trump and the U.S. administration that Canada is willing to negotiate, while signalling to the Canadian dairy industry that there will likely be a concession of some sort, but that’s about all we can read into Trudeau’s flexibility comment.

President Trump, meanwhile, will likely have a chance to enjoy some Canadian dairy products this week, as he will be making his first trip to Canada as president. Trudeau will be hosting Trump and the other G7 leaders for their annual summit on Friday and Saturday in Charlevoix, Quebec — a region that prides itself on its local food products, including cheese.

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