President Trump this week promised to resolve a dispute over U.S. dairy exports to Canada that could have a more far-reaching impact on cross-border trade, according to reports.
Several U.S. dairy trade groups and legislators at the state and national levels have been pushing for the Trump Administration to take action against Canada for what they deem as protectionist policies. The trade groups are seeking to appeal to Trump’s stated interest in protecting American businesses from unfair trade practices.
According to an article in the Washington Post, Canadian dairy farmers last year reduced pricing on ultrafiltered milk, which is used to make cheese. The result has been a steep drop in the demand for ultrafiltered milk from the U.S. About 75 family farms in the U.S. have been affected, and U.S. dairy processors have lost $150 million in revenues, the Post reported.
Sources told SN that the dispute is not likely to have a significant impact on the supply or availability of dairy products in the U.S. However, there could be other pricing and availability ramifications if the U.S. takes retaliatory action against products imported to the U.S. from Canada.
The U.S. in 2015 imported $22 billion in agricultural products from Canada, according to the U.S. Trade Representative. Leading imports included snack foods, red meats, live animals, vegetable oils, and processed fruit and vegetables.
The dispute also could impact the renegotiation of the North American Free Trade Agreement, or NAFTA. Ultrafilitered milk is not covered by NAFTA, according to the Post article, but tensions over the issue could affect how other aspects of the trade agreement are re-examined.
The National Milk Producers Federation, the U.S. Dairy Export Council and the International Dairy Foods Association earlier this month called on the federal government, and on governors in Northern states, to take immediate action on Canada’s dairy pricing practices, as U.S. dairy farmers’ livelihoods are threatened.
Several U.S. lawmakers from both parties have joined the call for action, including the entire Congressional delegation from Wisconsin and legislators from New York, two major dairy-producing states bordering Canada.
During a visit to Kenosha, Wis., on Tuesday, Trump said he would seek to resolve the matter.
"It's another typical one-sided deal against the United States and it's not going to be happening for long," Trump was quoted as saying in a Reuters report.
The report said dairy exporters in several other countries, including Mexico, The European Union, Australia and New Zealand, have also decried Canada’s dairy-pricing practices as being protectionist.
U.S. dairy trade groups said they were encouraged by Trump’s statement.
“We thank President Donald Trump for speaking out in Wisconsin against the harmful pricing policy Canada implemented in an effort to stifle competition with the United States,” said Jim Mulhern, president and CEO, National Milk Producers Federation, in a statement. “We have repeatedly stressed that trade must be fair and that all countries should be held accountable when they break the rules. Canada’s repeated disregard for its dairy trade commitments to the United States has left American dairy farmers enduring the severe and unfair consequences.”
Canada, meanwhile, said the problem is not being caused by Canada’s dairy-pricing policies, but instead stems from a global glut of dairy products.
“The truth is, both the U.S. and world dairy markets are currently over-saturated, which has led to low prices at the farm-gate and a lower price received by the processors,” said Isabelle Bouchard, director of communications and government relations at Dairy Farmers of Canada, in a blog post. “Simply put, in the U.S, and around the world, too much milk is being produced.”
Bouchard cited a Wisconsin-based dairy processing company that has cut back on production, which is resulting in the need for 75 local dairy farmers to find other processors to handle their output.
“There have been no changes to Canadian regulations related to dairy imports, or changes to Canadian dairy tariffs,” she said.
The U.S. dairy groups, however, said their difficulty in exporting dairy products to Canada were a “direct consequence” of Canada’s National Ingredients Strategy and new Class 7 milk pricing program.
“Class 7 is a domestic policy, the sole purpose of which is to allow the Canadian dairy sector to be able to respond to a changing Canadian market environment,” said Bouchard. “The implementation of Class 7 does not block imports, or restrict American access to the Canadian market — Canadian businesses are still free to choose their own suppliers, just like American companies do.”