Skip to content

Trump likely to target dairy supply management in NAFTA talks

A dairy farmer protest against the Trans-Pacific Partnership at Parliament Hill, October 2015.

The supply management of dairy in Canada is likely to be on the table in the upcoming North American Free Trade Agreement (NAFTA) negotiations.

This morning CBC reports, “A confidential briefing for President Donald Trump’s transition team flagged Canada’s dairy policies and the ‘deeply rooted’ softwood lumber dispute as trade issues to watch. While it outlines problems with Canada’s supply management for dairy products, the briefing notes are silent on other supply-managed products such as eggs or poultry.”

In short, in the 1970s a system of supply management came into effect in Canada to regulate the supply of dairy products. The national system, managed by the Canadian Dairy Commission, means that imports of these goods are limited in areas where domestic products can meet demand. The system means consistent prices for both producers and consumers. The price the farmer receives is set by provincial bodies, such as the Dairy Farmers of Ontario, taking into account the Canadian Dairy Commission’s study of production costs.

A Government of Ontario fact sheet further explains, “Supply management systems are controlled by national bodies and by provincial commodity marketing boards that have been delegated powers by federal and provincial governments. The amount of each commodity that is marketed by producers is controlled through a quota system. The volume of the commodities imported into Canada is limited by tariff rate quotas, under which very high tariffs are applied on imports above a specific level. By matching the total supply of the product available in Canada with the market demand, supply management systems aim to provide efficient producers with fair returns and to provide Canadian consumers with an adequate supply of the product at reasonable prices.”

Significantly, the CBC article adds, “On dairy policy, the briefing note says Canada is planning changes. ‘Canada restricts imports of dairy through supply management’, officials wrote. ‘With CETA and TPP providing additional access for imports, Canada is looking to implement new policies in response to Canadian dairy farmer demands that undermine current U.S. access for dairy products valued at $200 million.'”

Many farmers oppose the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) and the Trans-Pacific Partnership (TPP) because they see these deals representing the slow erosion of supply management. Farmers have also sought compensation for lost income from the implementation of these deals. Under CETA, Canada will more than double the amount of European access into the Canadian cheese sector to around 30,000 tonnes annually, while under the TPP Canada would give up 3.25 per cent (some say closer to 4 per cent) of its dairy market over five years to allow for imports from TPP countries, notably the United States.

As a result of those deals, the Harper government promised to provide a $4.3 billion, 15-year compensation package to Canadian dairy farmers. To date, the Trudeau government has stated it “appreciates the importance of compensation to affected sectors”, but has not named a dollar figure for compensation.

Former Liberal cabinet minister John Manley, now the head of the Business Council of Canada, opposes supply management noting that it shields a relatively small number of farmers with a tariff wall that forces Canadians to pay inflated prices. He argues that the federal government should begin to buy out quotas over time or compensate farmers reliant on the system.

Trump may also go on the offensive with respect to what many American farmers see as an illegal subsidy to block US concentrated milk protein exports into Canada.

The Globe and Mail has reported, “Protein imports reached nearly $200-million this year, displacing at least 10 per cent of Canada’s milk supply in the making of cheese, yogurt and ice cream. Much of that milk comes from dairies in New York State. So starting April 1, 2016, dairy farmers in Ontario dropped the price of industrial milk by creating a new ‘milk class’ for dairy ingredients. The aim is to undercut the price of imported U.S. milk protein and entice Canadian dairies, such as Gay Lea Foods and Parmalat, to make these ingredients themselves, rather than import them from the United States.”

These issues are imminent. On February 2, Trump set a 90-day timetable for the renegotiation of NAFTA to begin.

The Council of Canadians is calling on the Trudeau government to protect farmers and to hold public consultations before it renegotiates NAFTA. To send your letter to the prime minister with these demands, please go to our online action alert NAFTA renegotiations cannot be another backroom deal.