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

The Woolwich Observer - - VENTURE - FAISAL ALI

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 litres 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, so­called, 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,’” said 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 and limited, sup­ply man­age­ment tends to en­cour­age smaller op­er­a­tions in Canada, un­like the si­t­u­a­tion 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 thou­sand 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.”

The hard-fought USMCA still needs to clear a few more ob­sta­cles be­fore it be­comes the law of the land, in­clud­ing re­quir­ing rat­i­fi­ca­tion from U.S. law­mak­ers. The process won’t take place un­til af­ter the U.S. midterms next week.

Shop­pers can ex­pect more op­tions at the gro­cery store as U.S. dairy prod­ucts gain en­try into Cana­dian mar­kets. Cana­dian milk prod­ucts can still be dis­tin­guished by the “Dairy Farm­ers of Canada” and blue cow logo.

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