On Sept. 30, the Trump administration finally reached an agreement with Canada on the renegotiation of the North America Free Trade Agreement (NAFTA), submitting a trade deal to Congress that includes Canada and Mexico. On the dairy side, the new deal — the United States-Mexico-Canada Agreement (USMCA) — eliminates Canada’s Class 7 pricing system and creates additional market access for U.S. exports to Canada.
Although USMCA won’t go into effect anytime soon (most of the key provisions don’t start until 2020), reaction from U.S. and Canadian dairy organizations was swift. On the U.S. side, the reaction was generally positive.
In a joint statement, the International Dairy Foods Association (IDFA), the U.S. Dairy Export Council (USDEC) and the National Milk Producers Federation thanked Trump administration negotiators for “fighting hard against Canada’s trade-distorting practices.”
“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.
Michael Dykes, D.V.M., president and CEO of Washington, D.C.-headquartered IDFA, added that the organizations are pleased that the administration succeeded in getting Canada to scrap its Class 7 pricing.
“This new agreement will preserve our vital partnership with both countries and allow the U.S. dairy industry to seek more export opportunities,” he said.
But the dairy organizations said that the ultimate benefit of USMCA will depend on how it is implemented. They 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.
Meanwhile, Brody Stapel, president of Green Bay, Wis.-based Edge Dairy Farmer Cooperative, called Canada’s inclusion in the trade deal “a critical win” for its dairy farmers.
“The partnerships built over the years with Canada and Mexico through NAFTA have been a major part of growth for our businesses,” he said in a published statement. “We are both relieved and excited to know that we can continue to maintain both of those markets.”
Reaction on the Canadian side, however, was much less enthusiastic.
“The announced concessions on dairy in the new USMCA deal demonstrates once again that the Canadian government is willing to sacrifice our domestic dairy production when it comes time to make a deal,” Pierre Lampron, president of Ottawa, Ontario-headquartered Dairy Farmers of Canada, said in a published statement.
Canadian dairy processor Agropur also issued a press release that expressed disappointment in the deal.
“Canada has given in, and this will have a major impact on our members in five provinces and on the entire Canadian dairy industry,” said René Moreau, president of Agropur. “These latest concessions come on top of others that were recently made, namely the import quotas granted under the Canada-Europe Free Trade Agreement and the concessions in the Trans-Pacific-Partnership. The cumulative effect will clearly have an impact on Canada’s dairy industry.”
Much ado about … little?
Ultimately, the new deal raises U.S. access to Canada’s dairy markets to only about 3.6% percent, up from the existing level of about 1%, Business Insider reported.
“The news of Canada joining the revised NAFTA trade agreement is positive for dairy markets, but it is less bullish than the fanfare would suggest,” noted Matt Gould, dairy and food market analyst for Chicago-based Rice Dairy LLC, in an Oct. 2 analysis. “Once the trade agreement enters into force, Canada will cede a small portion of its domestic dairy market to the USA, but it will continue exporting nonfat milk solids — in the form of infant formula and skim milk powder — at similar volumes to recent history and will not start restart purchasing of ultrafiltered milk.”