Prediction time: Smith said he expects Canada’s supply management system will survive NAFTA renegotiation intact. “Dairy farmers in Canada are not subsidized, all of our income is derived from the marketplace; we are significant contributors to the overall GDP and pay a huge amount of taxes,” he said, adding that the system protects farmers from the boom and bust cycles that pose problems for U.S. producers as well. “What I’d like to see is a world where farmers everywhere have sustainable production and profitability so we can all make a living. How do you accomplish that? We believe we’ve been able to achieve that by producing based on what is needed domestically.”
Smith said he doesn’t think the market access Canada agreed to grant in the Trans-Pacific Partnership can be transferred to NAFTA 2.0, though that will be up to trade negotiators to decide. He added that he thinks NAFTA has been very good for the American dairy industry, noting that Canada and Mexico are two of its top export markets and that the U.S. runs a dairy trade surplus with Canada of about 5-to-1.
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OVERPRODUCTION EVERYWHERE: The U.S. has no problem with Canada’s supply management system per se, “but if you’re going to have supply management, then manage your supply,” Jaime Castaneda, senior vice president for trade policy at the National Milk Producers Federation, said in an interview last week. “This is the problem. They have grown their production more than any other country in the last few years.” He said Canadian producers have increased milk production to meet rising domestic demand for butterfat, which has resulted in surplus supply of milk protein.
That surplus of milk protein, and a new ingredient pricing policy adopted by Canadian dairy farmers and processors, prompted Trump’s outburst on Twitter earlier this year. U.S. producers have been exporting ultra-filtered milk to Canada duty-free, a product that wasn’t restricted when NAFTA was originally negotiated because it’s a relatively new ingredient. In February, Canada lowered the price of milk protein to incentivize processors to use up domestic supply in higher value products, like cheese and yogurt.
Smith, of Dairy Farmers of Canada, said that even if the new pricing policy were removed, that would not help U.S. dairy producers. “We’re a sovereign nation, and we have our own domestic product we need to utilize. If U.S. farmers weren’t in this situation of so much overproduction, I don’t believe it would even be an issue,” he said, adding that Canada’s government is “thrilled” that the nation’s dairy industry came up with “an innovative way” to meet the needs of a changing domestic market.