International trade was one of the recurring themes offered by President Donald Trump during his campaign and in subsequent remarks following his victory in November. He specifically focused on the need for strict enforcement of trade obligations with our trading partners, and promised that they would be made to play by the rules.
While Trump may have had Mexico or China in mind when he made those comments, it’s clear that our neighbors to the north are up to no good – again – when it comes to U.S. dairy exports.
A new wave of protectionist trade policies from Canada started last April when the province of Ontario implemented a new dairy ingredients strategy, creating a new ingredient class that is priced to compete with imports. This strategy has had a negative impact on U.S. companies selling ultra-filtered milk to Canadian processors, who have imported the products duty-free under the North American Free Trade Agreement (NAFTA) for years to make cheese.
We’ve heard estimates that as much as $150 million worth of ultra-filtered milk exports has been lost by companies in Wisconsin and New York because they are highly reliant on their trade with Canada.
To make matters worse, the Dairy Farmers of Canada and the Dairy Processors Association of Canada concluded negotiations this past summer on a national ingredients strategy called the “Agreement in Principle.” The agreement, which could be implemented as early as this month, basically took the Ontario strategy and nationalized it.
Canada stands on guard
The U.S. dairy industry is already restricted by Canada’s supply management system and the limited market access granted under NAFTA, so these further limitations will send adverse ripples through the entire supply chain. As one of our top trading partners, Canada’s flouting of its trade obligations is simply unacceptable.
IDFA and dairy organizations around the world issued a joint letter last September asking officials in Australia, New Zealand, Mexico, the United States and the European Union Commission to initiate a World Trade Organization (WTO) dispute-settlement proceeding to challenge the agreement because it breaches Canada’s trade obligations under the WTO and NAFTA.
We have support from lawmakers, too. Numerous congressmen and governors whose states depend on dairy exports to Canada have spoken out against Canada’s protectionist dairy policies. Here’s a quick look at their recent actions.
- Senators Tammy Baldwin (D-WI) and Charles Schumer (D-NY) sent a letter to the U.S. Department of Agriculture and the Office of the U.S. Trade Representative stating that companies in their states “have already lost considerable export sales as a result of the Ontario dairy policy introduced this past spring.”
- New York Governor Andrew Cuomo sent a letter to Canada’s Prime Minister Justin Trudeau opposing proposed regulations by Canada that could result in a $50 million market loss for New York’s dairy industry.
- A bipartisan delegation of 22 New York legislators wrote to President Obama, urging his administration to “take all necessary action” to eliminate Canada’s unfair barriers to U.S. dairy exports.
- Wisconsin Governor Scott Walker sent a letter to Trump stating, “Wisconsin’s dairy producers have been disadvantaged by Canada’s recent change in their pricing policy.”
IDFA had raised this issue with the Obama administration and will do the same with the Trump administration and Canadian stakeholders in the United States and Ottawa. We have several new outreach activities planned and will begin implementing them full force.
One welcome step is the nomination of Robert Lighthizer as the new U.S. Trade Representative. He’s a partner at Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates, where he specializes in international trade. According to the Skadden website, Lighthizer has “focused on market-opening trade actions on behalf of U.S. companies seeking access to foreign markets” and “has been lead counsel in scores of antidumping and counterveiling duty cases during the past three decades.”
Trading with Canada’s broad domain
The U.S. dairy industry is highly competitive internationally, and we look forward to working with Lighthizer on the many trade issues that are critical to our members, such as combatting protectionist policies in Canada.
Fair access to the Canadian market is important for the industry and the health of the U.S. economy. IDFA will insist on fair treatment and immediate action by the new administration. This is a trade priority for IDFA going forward, and until Canada starts playing by the rules, we’ll keep pounding at their door.