‘It’s a win-win for the Americans’
Wider foreign access to dairy market spurs questions over payout to farmers
OTTAWA The Liberal government will dole out what is likely to be billions of dollars in compensation for dairy farmers, following a new continental trade deal that critics say only further restricts industry’s ability to compete in the global market.
The so-called U.S.-MexicoCanada Agreement (USMCA) will widen foreign access to the domestic dairy market by about 3.6 per cent, according to analysts, higher than the 3.25 per cent that was conceded by Canada under the Trans-Pacific Partnership (TPP). In 2015, former prime minister Stephen Harper offered as much as $4.3 billion to compensate dairy and poultry producers for TPP, prompting questions over the cost of the latest round of payouts.
“You can bet the ask is going to be significant here,” said Martha Hall Findlay, chief executive of the Canada West Foundation in Calgary.
The foundation has long called for the scrapping of Canada’s supply managed dairy industry, which effectively controls markets through production quotas, fixed pricing and heavy tariffs on imports ranging between 246 and 300 per cent. “These piecemeal compensations could end up being far, far more than what it would actually cost to dismantle supply management in its entirety,” Hall Findlay said.
Foreign Affairs Minister Chrystia Freeland on Monday did not specify how much money would be paid out to embattled dairy producers, but told reporters the compensations were “the right thing to do.”
The federal government has not yet detailed precisely how much compensation would be given out to farmers under TPP.
Canada joined the USMCA on Sunday evening, just hours before a U.S.-imposed deadline. The deal, if completed, would put an end to over a year of negotiations to modernize the North American Free Trade Agreement, first signed in the early 1990s.
Analysts say the deal includes some major concessions for producers. “It’s a hard hit,” said Al Mussell, lead researcher at the Ontario-based Agri-Food Economic Systems.
Mussell said the most striking concession is the elimination of Class 7 milk products, including high-protein products like milk powders and baby formulas, which were long a sticking point in Canada-U.S. trade negotiations. The classification was introduced in March 2017 as a way for Canadian producers to keep input costs artificially low.
The deal also slaps a levy on any Canadian exports of Class 7 milk products over a certain threshold, effectively limiting companies’ access to foreign markets.
Hall Findlay said the Class 7 concessions, combined with wider access to the dairy market for U.S. firms, will restrict the ability of Canadian firms to compete globally.
“It’s a win-win for the Americans,” she said. “Were opening more of our domestic market, but we’re doing nothing to enhance our ability to expand into other global markets. At some point this does not make sense for Canada.”
The USMCA has led to widespread calls for compensation to farmers, both from producers and conservative-leaning politicians.
“We fail to see how this deal can be good for the 220,000 Canadian families that depend on dairy for their livelihood,” Pierre Lampron, president of Dairy Farmers Canada, said in a statement..