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European Union raises Canada’s ultra-filtered milk pricing strategy as a CETA concern

The European Union is raising concerns about Canada’s “national ingredients strategy” for ultra-filtered milk just two months out from the provisional application of the Canada-European Union Comprehensive Economic and Trade Agreement (CETA).

Earlier this year, a national ingredients strategy was implemented in Canada that effectively meant the price for ultra-filtered or diafiltered milk (also called concentrated milk protein ingredients), which is used to make cheese, yogurt and other dairy products, dropped to the international price of milk products. By now being sold at prices competitive with international rates, ultra-filtered milk has put a dent in the multi-million market previously available to U.S. dairy producers.

The National Farmers Union has previously argued that the export of U.S. ultra-filtered milk to Canada “undermines our supply management system and unjustly takes away market from Canada’s dairy farmers”.

The Globe and Mail now reports, “Canada currently imposes a prohibitive 250-per-cent tariff on European imports of the product, but it will drop to zero when the Comprehensive Economic and Trade Agreement (CETA) comes into force. …[But] a top EU official expressed concern on Monday [May 1] that its farmers may not reap the spoils of the elimination of steep Canadian tariffs on milk-protein ingredients when [CETA] takes effect in July.”

The article adds, “[Phil Hogan, the EU commissioner for agriculture and rural development] characterized Canada’s new ingredient-pricing scheme as a ‘potential worry’ for the EU. He declined to detail specific objections, but said he raised the issue in meetings on [May 1] in Ottawa with Canadian International Trade Minister François-Philippe Champagne and Agriculture Minister Lawrence MacAulay.”

Horgan says, “We are just demanding the full implementation of [CETA].”

Last September, dairy groups in the European Union called on agriculture officials to launch a World Trade Organization dispute settlement proceeding against Canada once the national ingredients strategy had been implemented.

Given the provisional application of CETA does not include the Investment Court System (a version of the Investor-State Dispute Settlement provision) until if/when it is fully implemented (after it has been ratified by 38 national and regional parliaments), presumably the WTO is the fall-back option for European financial interests in this circumstance.

This issue has also been the subject of tension with the Trump administration.

TVOntario explains, “There used to be five different classes of milk under NAFTA, but last year Ontario added a sixth class, plus a new ‘national ingredients strategy’ that lowered the cost for Ontario processors to buy Canadian milk ingredients. Soon other provinces followed suit. It dramatically cut the prices on ultra-filtered milk in Canada.”

Global News now reports, “Most dairy products sent to Canada are subject to heavy tariffs, but ultra-filtered milk from the U.S. wasn’t subject to those tariffs because it came into use after NAFTA was approved in 1994. …[U.S. President Donald] Trump has recently been contacted by the governors of both Wisconsin and New York, as well as several U.S dairy production boards, who want him to urge Canadian Prime Minister Justin Trudeau to do away with the pricing policy. The letter asked the U.S. President to push the matter to the World Trade Organization if the Canadian pricing continues.”

There are just over 11,000 dairy farms in Canada, with more than 9,200 of those farms located in Ontario and Quebec.