Renegotiated NAFTA remains a concern for the dairy industry

Though it remains to be ratified, the USMCA compounds other trade deals in giving share of market to foreign producers

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[Faisal Ali/The Observer]

Since threatening to tear up the North American Free Trade Agreement, the U.S. has seldom minced words when it comes to its views on Canada’s  supply managed industries.

“It’s very unfair,” griped U.S. President Donald Trump multiple times throughout the NAFTA renegotiations, targeting Canada’s dairy industry in particular with accusations of trade profiting at the expense of U.S. farmers.

“No tariffs, no barriers, that’s the way it should be and no subsidies,” said the president earlier this year to the media, urging his neighbours in the north to abandon their age-old method of controlled production. “It’s going to stop, or we’ll stop trading.”

Prime Minister Justin Trudeau was equally adamant in his refusal. “I’ve told him many times: ‘No, he won’t touch, we won’t touch, our supply management system.’” he said to reporters. “We will always defend our supply management system.”

With all the rhetoric, Canada’s dairy sector may expected to draw the shortest straw when a new trade agreement was finally penned last month. Ultimately, however, Canada did not dismantle its entire supply management system, nor did it entirely stand firm to U.S. pressure. Rather, it compromised.

Under the new terms of the United States-Mexico-Canada Agreement (USMCA), Canada is offering U.S. dairy a moderate 3.6 per cent expanded share of its domestic dairy market. That means more American milk products entering local grocery markets, competing with Canadian brands on the same shelves.

While a comparatively small amount of Canada’s dairy market, which in 2016 produced approximately 8,470-million liters of milk, the 3.6 per cent needs to looked at in the context of the last several years, says a professor and researcher at the University of Waterloo.

“I don’t subscribe to the cohort that says it’s a relatively benign agreement and at least we still have supply management – and I guess that is true,” said Bruce Muirhead, the associate vice-president for research, oversight and analysis at the university.

“USMCA gave 3.6 per cent of the dairy market to American producers, but that’s on top of … a number of other agreements that we’ve signed like the Comprehensive Economic and Trade Agreement (CETA), and now the comprehensive and progressive, so-called, Trans-Pacific Partnership (TPP),” he said.

“I think it’s getting up pretty close to 15 per cent anyway of our dairy market that’s been, I would almost say sacrificed on the altar of foreign agreement, minus the tariff rate quota that came into effect in the late 1990s. So it’s a fairly significant erosion of dairy farmer potential and dairy farmer income for sure.”

The concern was mirrored by local dairy farmer Adam Van Bergeijk of Mountainoak Cheese. Located in New Hamburg, the local operation produces chesses from their own cows on the farmstead.

“They call it USMCA. So I think that stands for ‘United States is milking Canada,’” Van Bergeijk. “At this moment, it’s really difficult to be sure what the effect is going to be, but it doesn’t look good for the future… [We] experience quite a bit of imports from Europe, and now there is all the TPP coming up. And now this one is the cherry on the pie in that regard.”

The concerns extend beyond just the supply managed industries, suggest Muirhead. Because Canada relies on a quota system for milk production, and because quota are expensive an in limited supply, supply management tends to encourage smaller operations in Canada than it does in the U.S.

The smaller Canadian farms are typically more connected to local economies than the massive concentrated animal feeding operations (CAFO)’s prevalent in the U.S.

“The average dairy farm is about 80 milking cows,” says Muirhead. “So when you have local cows, I mean you are a local guy, so they would come to Elmira, for example, to buy supplies. They’d go to the local supermarket, the co-op, Home Hardware, the Canadian Tire, all that kind of stuff. They’re absolutely local people, and in many ways they’re fully integrated into the community in a way that if you milk a 1,000 cows, you’re not.”

The large CAFO’s and farmsteads of the U.S., by contrast, can’t be supported by local economies, and typically must import their feeds and supplies from further afield.

“So supply management, as a concept or a practice, extends far, far beyond merely delivering milk to processors or to dairy farmers of Ontario to the processors. Or eggs to the graders,” says Muirhead. “It supports the community in a way which is really not seen probably in most other communities around the world that are in rural areas, so it’s really important that we have this system.”

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