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Canada argues its dairy policies not trade-distortingCanada argues its dairy policies not trade-distorting

NMPF calls Canadian ambassador’s argument absurd and says U.S. farmers clearly have lost business due to changes in Canada’s milk pricing system.

Jacqui Fatka

April 20, 2017

2 Min Read
Canada argues its dairy policies not trade-distorting

This week, President Donald Trump took on a new Canadian dairy pricing system, which U.S. milk industry groups contend is acting as a trade barrier to exports into Canada.

In a letter to Wisconsin Gov. Scott Walker and New York Gov. Andrew Cuomo on Wednesday, however, Canada ambassador David MacNaughton argued that Canada’s dairy policies are not the cause of financial loss for U.S. dairy farmers.

“Dairy farmers globally - and not just in the U.S. - are facing many challenges,” the letter stated. “In particular, both Canadian and American farmers have been dealing with international pressures of low world prices and a surplus of skim milk solids. Like their U.S. counterparts, Canadian farmers are trying to adapt.”

MacNaughton explained that this is why the Canadian industry has taken steps to reform, including the negotiation of its national ingredient strategy. "The national ingredient strategy is industry-driven and was developed between dairy producers and processors,” he added.

Jim Mulhern, National Milk Producers Federation president and chief executive officer, does not agree with Canada's assessment, arguing, “It’s absurd for the Canadian government to assert there is no relationship between its new Class 7 policy and the lost U.S. milk sales there. When customers in Canada, who have been purchasing milk products from American suppliers for years, suddenly decide to switch to domestic suppliers after Canada implements a major change in milk pricing, it is abundantly clear that the lost business incurred by U.S. farmers is directly tied to Canada’s milk pricing system.”

Countering what MacNaughton alleged in his letter, Mulhern explained, “The problems this pricing policy are creating for dairy farmers in Wisconsin, New York and Minnesota are real, and they have nothing to do with U.S. ‘overproduction.’”

Mulhern said U.S. companies had, until recently, supplied Canadian customers during periods of relatively tight supplies and when production increased. “The only change has been Canada’s deliberate pricing policy decision – starting last year in Ontario and spreading more recently to other provinces – to create a national ingredients strategy to undercut competition from the United States," he said. "Canada didn’t like U.S. farmers supplying their processors’ demand for milk proteins, so they changed the rules of the game. First, they moved to block our exports, and even more problematic, their new pricing strategy is positioning them to further undercut global powder markets by dumping their surplus on the world market.”

Canada argued that it is upholding its international trade obligations. Under the North American Free Trade Agreement, the U.S. has duty-free and quota-free access for milk protein substances, including diafiltered milk. MacNaughton explained that access has not changed.

However, Mulhern said Canada’s new policy has also come under fire from Australia and New Zealand, which have also raised objections to Canada’s policy changes.

“Canada’s effort to shift the focus away from the internal problems of their milk pricing system is disingenuous, at best,” Mulhern noted. “Canada can support its industry without intentionally using policy tools to harm U.S. dairy farmers and world dairy markets.”

About the Author(s)

Jacqui Fatka

Policy editor, Farm Futures

Jacqui Fatka grew up on a diversified livestock and grain farm in southwest Iowa and graduated from Iowa State University with a bachelor’s degree in journalism and mass communications, with a minor in agriculture education, in 2003. She’s been writing for agricultural audiences ever since. In college, she interned with Wallaces Farmer and cultivated her love of ag policy during an internship with the Iowa Pork Producers Association, working in Sen. Chuck Grassley’s Capitol Hill press office. In 2003, she started full time for Farm Progress companies’ state and regional publications as the e-content editor, and became Farm Futures’ policy editor in 2004. A few years later, she began covering grain and biofuels markets for the weekly newspaper Feedstuffs. As the current policy editor for Farm Progress, she covers the ongoing developments in ag policy, trade, regulations and court rulings. Fatka also serves as the interim executive secretary-treasurer for the North American Agricultural Journalists. She lives on a small acreage in central Ohio with her husband and three children.

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