One of the key sticking points in the ongoing negotiations between Canada and the United States in the Nafta talks has been the Canadian dairy supply management system. The U.S. has indicated they would like to see changes which would allow for an increase in how much milk they can send to Canada. Meanwhile, Canadian farmers are saying the system is good as it is.
Joy Smith is the communications director for Sask Milk. She explained what the system is, and how it works.
“What it does is make sure as a country we don’t overproduce milk and have to dump it, or find export markets for it, or watch price instability in the market,” Smith said.
The system currently allows for 10 percent of the milk to be sold in Canada to be from outside the country, and it is allowed in tariff-free. U.S. president Donald Trump has called for an increase in the Canadian market to allow more U.S. milk in, as the existing system isn’t fair to American producers. Smith points out, it isn’t true.
“The fact of the matter is that Canada allows 10 percent of our Canadian dairy market in tariff-free - zero tariff,” Smith confirmed. Then, she pointed out where a flaw with Trump’s public argument. “The U.S. actually only allows three percent of their market in tariff-free.” She added the U.S. also maintains a trade surplus with Canada when it comes to dairy right now.
The difference between the policies in place between the two countries could also have a negative impact on Canadian producers were the markets to be opened up.
“In Canada, dairy farmers are not allowed to use the growth hormone rBST on their cows, in the U.S. it is allowed,” Smith said. Other policies include U.S. producers being subsidized by the federal government. This has resulted in American producers dumping their milk when they overproduce. Dairy farmers in Canada believe if the borders were opened, the Americans would then flood the Canadian market with cheaper milk. This would result in American producers being paid for the product twice: once when it is sold, and the second time when they receive their subsidies, creating an unbalanced playing field.
Why dairy is a major sticking point in the negotiations has many scratching their heads. Smith pointed out the dairy trade between Canada and the United States makes up a fraction of the overall trade between the two countries. It is also an industry where Canada is the underdog in terms of market share.
“The U.S. has a five-to-one trade surplus with Canada,” Smith explained. “They already are definitely on the positive side of the trade relationship between Canada and the U.S., so this fixation of picking on Canadian dairy is unusual, to say the least."
The negotiations between Canada and the U.S. on a new trade deal are ongoing.