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International dairy groups seek Canadian dairy policy changes

Dairy groups from Argentina, Australia, EU, Mexico and New Zealand join U.S. in call to challenge Canada’s milk pricing system.

Ten international dairy industry organizations, including three U.S. dairy groups, are asking their federal trade ministers to intercede in the increasingly acrimonious dispute over Canada’s harmful dairy policies that are having global repercussions. The groups cosigned a joint letter requesting that their respective trade ministries “pursue all avenues available to challenge these measures, including (World Trade Organization) dispute settlement and bilateral trade agreement relationships.”

The U.S. dairy sector -- represented by the International Dairy Foods Assn. (IDFA), the National Milk Producers Federation (NMPF) and the U.S. Dairy Export Council (USDEC) -- together with seven dairy groups from Argentina, Australia, the European Union, Mexico and New Zealand, is insisting that Canada remove recently implemented policies that are facilitating the dumping of Canadian dairy products on the international market while making Canada's already prohibitive restrictions on dairy imports even more onerous.

“IDFA will use every opportunity to urge Administration officials and legislators who are working to modernize the North American Free Trade Agreement (NAFTA) to tackle these unfair, illegitimate and protectionist policies,” IDFA president and chief executive officer Dr. Michael Dykes.

Jim Mulhern, NMPF president and CEO, added that “Canada’s revised dairy policy amounts to a ‘beggar-thy-neighbor’ approach, damaging not just its neighbor to the south but also causing harm to other major dairy exporting countries around the world. This policy must stop now, before any more damage is done to American farmers and those from other nations seeking to compete on a level global playing field.”

“Canada has been adopting policies that run counter to our long-standing agreements and upending what has until recently been a mutually beneficial trade relationship,” Tom Vilsack, USDEC president and CEO, said. “Our trade agreements must be honored and not ignored — or worse — by our closest neighbor.”

In February, Canada implemented a special milk Class 7 pricing policy that the groups say artificially lowers milk ingredient prices for Canadian processors and is designed to incentivize the substitution of domestic dairy ingredients for imported ingredients while also pushing Canadian proteins out onto world markets at below-market prices. The result of this policy is the widely reported cancellation of purchases by Canadian cheese makers of U.S.-sourced ultra-filtered milk and the even more damaging ability of Canadian exporters to sell milk proteins globally at a much lower price, thereby undercutting exports from the U.S. and the other countries. It is due to this latter impact that dairy groups in multiple countries have been expressing opposition to Canada’s new system.

The letter was sent to U.S. Trade Representative Ambassador Robert Lighthizer as well as to the trade ministers for Argentina, New Zealand and Australia, Mexico’s economy secretary and the EU trade commissioner. In addition to the U.S. dairy leaders, the letter was signed by the CEOs of the European Association of Dairy Trade, European Whey Products Assn., European Dairy Assn., Dairy Companies Association of New Zealand, Camara Nacional De Industriales de la Leche, Centro De La Industria Lechera and Australian Dairy Industry Council. 

“Our respective dairy industries are firmly of the view that the operation of Ontario’s Class 6 and Canada’s Class 7 contravene Canada’s international commitments,” the letter noted. “Canada's increasingly protectionist policies are diverting trade, with attendant global price-depressing impacts, and are in conflict with the principles of free markets and fair and transparent trade. We, therefore, request the authorities of Argentina, Australia, the EU, Mexico, New Zealand and the U.S. to take all steps available to them to resolve this issue and ensure that Canada complies with its international obligations."

Earlier this month, U.S. Secretary of Agriculture Sonny Perdue conducted a series of meetings with Canadian officials in which he raised the points of disagreement and reinforced that these issues need to be resolved, particularly in light of the renegotiation of NAFTA.

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