On Sept. 30, the United States and Canada reached a deal for Canada to stay in a free-trade pact with the United States and Mexico. The trade agreement includes the elimination of Canada’s Class 7 pricing system and the creation of some additional market access, two important objectives of the U.S. dairy sector, the International Dairy Foods Association (IDFA), U.S. Dairy Export Council (USDEC) and National Milk producers Federation (NMPF) said in a joint press release.

The organizations thanked Trump Administration negotiators for “fighting hard against Canada’s trade-distorting practices.” The groups said they look forward to reviewing the text of the new U.S.-Mexico-Canada Agreement (USMCA), in particular the dairy provisions, to better understand the benefits to U.S. agriculture and dairy.

Canada has strictly controlled imports for decades to limit the supply of milk in the country, they noted. Recently, as milk production in Canada has grown, the country created the Class 7 pricing system to dump surplus milk proteins onto global markets, in direct competition with exports from the United States and other nations.

From a strategic standpoint, the agreement announced Sunday night will benefit America’s dairy sector because it preserves the overall structure of the 24-year-old North American Free Trade Agreement (NAFTA), the organizations said.

“The outlines of the NAFTA pact remain intact, which will allow the U.S. agricultural sector to continue developing new international markets for our farmers,” said Tom Vilsack, president and CEO of Arlington, Va.-based USDEC. “We also need to pursue new free trade agreements with other nations and resolve our trade conflicts with China. It is imperative that the United States remains an integral player in driving the global trade agenda.” 

The dairy groups said that the ultimate benefit of USMCA will depend on how it is implemented. Now that a tentative trilateral agreement has been reached, the organizations urged the governments of the three nations to remove their tariffs on agricultural exports — as well as on steel and aluminum — which have been sticking points in relations among the United States, Mexico and Canada.

While Canada will remain a largely self-contained, protected milk market, “this agreement, when implemented, should give us additional marketing opportunities that will allow us to provide high-quality American dairy products to Canada, which means we’ve made incremental progress,” said Jim Mulhern, president and CEO of NMPF, Arlington, Va. “We appreciate that the Trump Administration continually raised the profile of our issues at the negotiating table.”

Michael Dykes, D.V.M., president and CEO of Washington, D.C.-headquartered IDFA, said that IDFA’s top priorities during the NAFTA modernization talks were maintaining dairy market access in Mexico and improving such access into Canada.

“We’re also pleased that the administration was successful in getting Canada to eliminate Class 7 pricing,” he said. “This new agreement will preserve our vital partnership with both countries and allow the U.S. dairy industry to seek more export opportunities.”

Response on the Canadian side was not so positive, however.

“Granting an additional market access of 3.59% to our domestic dairy market, eliminating competitive dairy classes and extraordinary measures to limit our ability to export dairy products will have a dramatic impact not only for dairy farmers, but for the whole sector,” said Pierre Lampron, president of Dairy Farmers of Canada, an Ottawa, Ontario-based national policy, lobbying and promotional organization representing Canada's farmers. “This has happened despite assurances that our government would not sign a bad deal for Canadians. We fail to see how this deal can be good for the 220,000 Canadian families that depend on dairy for their livelihood.”