NEWS
Canadian Dairy Conundrum
Chris Clayton DTN Ag Policy Editor
Thu Aug 6, 2015 02:27 PM CDT
(Page 1 of 3)

OMAHA (DTN) -- A lot of people pointed fingers at the giant red maple leaf late last week when Trans-Pacific Partnership trade negotiations appeared to stall. While automobile exports to Japan remain an issue, Canada's long-standing supply management programs, particularly for dairy, also contribute to the gridlock delaying the 12-country trade deal.

According to a study by The Boston Consulting Group, 960,000 U.S. milk cows in the U.S. are within 155 miles (250 kilometers) of a Canadian dairy plant -- about equal to the whole Canadian dairy cow herd. This is based on 2012 data, the last time a survey was done on U.S. farms and cows. (Graphic courtesy of The Boston Consulting Group)

High import tariffs and production controls regulating roughly 12,000 Canadian dairy farmers are now key to unlocking a trade deal that involves nearly 800 million people and more than 40% of global gross domestic product.

Agricultural exports among all 12 Trans-Pacific Partnership countries are expected to grow about $8.5 billion by 2025, according to a USDA analysis. U.S. agricultural exports would increase about $2.8 billion.

The TPP countries also account for more than half of all Canadian ag exports and analysis shows Canada's beef, pork, grain and oilseed sectors could all gain from a robust trade deal.

The pressure is on Canada to open the domestic market to imported milk products, but key players in that country's dairy industry are pushing back with studies and lobbying efforts to keep out competition from the likes of the U.S. and New Zealand, the world's largest dairy export country.

MOST PRESSURE SINCE THE 1960S

Sylvain Charlebois, an economist at the University of Guelph in Ontario, who follows international trade and Canada's ag economy, said the TPP talks last week in Hawaii energized a lot of people about the issue of supply management. Charlebois noted Canada's dairy industry is seeing the most pressure it has faced since the 1960s to end its supply management system which limits milk production.

"Canada's position on supply management is becoming increasingly more difficult to sell to the world," Charlebois said in an interview with DTN. "It's not defendable any longer."

A Canadian-EU trade deal allowed Europe to export 17,000 tons of cheese annually to Canada with lower tariffs; the tradeoff allowed increased exports of Canadian beef and pork to Europe. "This was historically the first time any trade agreement has compromised the integrity of our food supply management regime," Charlebois said. "When it was signed it really created a debate within our country and of course we knew TPP was coming along."

Canada is not offering significant market access for dairy in TPP, but neither is Japan. Thus, the U.S. could not agree to "unrealistic demands for access to the U.S. market in light of the limited market access offers from Japan and Canada," stated the National Milk Producers Federation. NMPF is demanding balance between further opening of the U.S. market and getting more export opportunities.

"It is not yet clear how the negotiators will push past this to bring talks to a successful conclusion," said Jim Mulhern, president and CEO of NMPF. "But we will continue to work constructively to achieve a dairy package that provides comparable results between new export market opportunities to TPP's two key markets and any new import access."

Dairy Farmers of Canada, a national policy and lobbying organization, aggressively stepped up its defense of supply management and domestic milk. The group put out a poll last week which showed more than 70% of people surveyed agreed it was important for the government to protect the dairy industry. As many as 89% of Canadians polled also said it was important or very important that their milk products come from Canadian farmers.

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