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Canadian dairy policies impose $150 million trade barrier

Here’s the scoop on how Ontario and the Canadian Milk Supply Management Committee set up a $150 million trade barrier to U.S. dairy products.

Last week our story “Dairy organizations say Canada’s actions hurting US milk prices” outlined why the International Dairy Foods Association, National Milk Producers Federation, National Association of State Departments of Agriculture and U.S. Dairy Export Council appealed to President-elect Donald Trump for help. They also made certain that Canada’s trade violations were on the radar of key members of Congress. Here’s why.

The issue has been simmering since last April when Ontario adopted ingredient class milk pricing to effectively displace U.S. exports of ultrafiltered milk, primarily from New York and Wisconsin. Then the Canadian Milk Supply Management Committee considered “nationalizing” it.

Through the summer months, New York and Wisconsin state officials met with Canadian officials, trying to resolve the trade issues that impact ultrafiltered milk and force more skim milk powder into the global market. They were unsuccessful.

In October, New York Gov. Andrew Cuomo sent a letter of protest to Canadian Prime Minister Justin Trudeau, acknowledging that while the Canadian dairy industry is going through a period of transition and regulatory reform, “by no means does it make it acceptable for Canada to flout international trade agreements and devise strategies that unfairly harm a key export from New York.”

That letter, too, failed to gain traction in Canada. That’s why the U.S. dairy industry turned to Trump and his nominee for U.S. Trade Representative for help.

What Ontario’s Class Six reg did
As Gov. Cuomo pointed out in his letter, the Class Six regulation was intentionally designed to disincentive Canadian processors from using imported nonfat solid materials as ingredients in formulating other dairy products. Canada’s domestic processors use U.S. ultrafiltered milk to make a wide range of products from mozzarella cheese to yogurt.

“Canadian processors,” noted Cuomo, “have increased demand for ultrafiltered milk. New York’s processors were helping to meet that demand. However, the Class Six regulation of ingredients raises a barrier to our dairy exports.”

Cuomo urged the Trudeau administration to take into account both the benefits of existing trade between New York and Canada, as well as Canada’s World Trade Organization and North American Free Trade Agreement obligations. Otherwise, “New York will explore all options available to ensure fair access to this vital export market.”

That’s why the U.S. dairy industry is asking Trump to intervene.

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