Five Myths and Facts about Dairy in NAFTA
MYTH: The Canadian dairy supply management
program is a major cause of the current crisis in US
dairy markets.
FACT: Canada’s supply management program has
been in operation for more than 40 years, long
before US dairy markets entered into the current
difficulties. The U.S. crisis is due to massive
oversupply linked to the growth of mega-sized dairy
operations, and years of prices below the true cost
to farmers. Most Canadian dairy farms are family
owned and operated, and this program helps them
to stay on the land without reliance on public
subsidies. The U.S. agreed to Canadian restrictions
on dairy imports in NAFTA, which comply with WTO
rules that permit import restrictions where
domestic production is also limited. Import
restrictions along with domestic production
controls make it possible for Canada to balance
supply and demand at fair prices for both farmers
and consumers.
Recent sharp increases in consumer demand for
butter have reduced the market for high-protein
milk products. Over the last few years, U.S. dairy
processers have exported a high-protein product
(ultrafiltered milk or diafiltered milk) as a
concentrated protein product under customs
definitions, thereby avoiding Canadian dairy tariffs.
It was used in cheese and other food production. As
the market for these inputs has rebalanced, the
Canadian Dairy Commission decided to create a
new class of milk products, Class 7, for ingredients
like protein concentrates, skim milk and whole milk
powder. This is part of a National Ingredients
Strategy designed to ensure all components of milk
production are fully utilized. US processors continue
to export Class 7 and other dairy products to
Canada, although at lower prices than before the
ingredients strategy was put in place.
MYTH: Canada is dumping excess dairy production
on world markets, depressing global prices
FACT: While Canada, like the U.S., exports dairy
products, the volume of Canadian exports is much
lower than U.S. exports. According to the Canadian
Dairy Information Centre, the value of Canadian
dairy exports was CA $235 million (about US $181
million) in 2017. According to the U.S. Dairy Export
Council, the value of U.S. exports in January 2018
alone was US $400 million. While Canadian exports
increased in late 2017 as part of the rebalancing
involved in the ingredients policy, they have since
returned to much lower levels. In any case, the
volume of their exports as a percentage of global
exports is much too low to influence international
prices.
MYTH: Opening up Canada’s dairy markets in the
NAFTA negotiations will resolve the problems
confronting US dairy farmers
FACT: Even if NAFTA member countries’ dairy
market was completely liberalized, there is not
enough Canadian demand for dairy products to
make a meaningful contribution to U.S. dairy
farmers’ incomes or stability. A better solution
would be to amend the Farm Bill programs to
prioritize U.S. processor purchases from smaller
family farms at prices that meet their cost of
production. More than 50 US farm, labor and
consumer organizations, led by the National Family
Farm Coalition, recently sent a letter to Members of
Congress and USDA insisting on a series of changes
designed to prioritize production and sales by family
farms. It calls for changes in the Farm Bill and USDA
programs to remove excess supply from the market,
and increase the current price floor. In the longer
term, the groups call for dairy supply management
programs in the U.S.
MYTH: Canada’s dairy supply management program
is illegal under current trade rules
FACT: The Canadian government has continuously
adjusted its dairy supply management program to
comply with WTO rules. In 1989 the US-Canada FTA
included Canada’s WTO-compliant import
restrictions and were brought forward in the 1994
NAFTA agreement. Canada has made some
concessions for cheese imports under CETA, as well
as some market opening under the Trans Pacific
Partnership. The Canadian government is in no
position to make further concessions without
seriously undermining the program, something they
are unlikely to do, especially given the importance
of voters in Quebec and Ontario (where the
majority of Canadian dairy farmers are located) in
national elections.
MYTH: US dairy farmers are united in their
demands to open up Canadian markets
FACT: U.S. family farmers, in contrast to
agribusiness exporters, recognize that Canada’s
program has helped to keep farmers on the land,
contributing to their communities’ economic
viability, and that we should learn from their
experiences rather than seek to destroy that
program. The U.S. NFU, NFFC, Rural Coalition, as
well as the Teamsters Union (which includes
members in the dairy processing industry), IATP,
Food and Water Watch and Western Organization
of Resource Councils, have consistently supported
supply management since the NAFTA renegotiation
talks began, starting with a joint statement in
January 2017 and continuing with testimony and
public comments to USTR throughout the
negotiating process.
TRUTH
The combination of US agricultural and trade policies has decimated family farms and increased corporate concentration
in agriculture. Since NAFTA was implemented, the U.S. has lost some 247,000 family farms. The current system is
unsustainable in both environmental and economic terms, as farmers are compelled to export at below the true cost of
production. The goals of the Farm Bill and of U.S. trade and agriculture policies should be to ensure fair, healthy and
sustainable production. For that to occur, we need changes to both the Farm Bill and trade agreements that prioritize
local production and consumers’ right to know about their foods. Dismantling Canada’s successful supply management
program will do nothing to achieve those goals.
***
Based in Minneapolis with offices in Washington, D.C. and Berlin, Germany, the Institute for Agriculture and Trade Policy
connects the dots of global justice to ensure fair and sustainable food, farm and trade systems. www.iatp.org
The National Family Farm Coalition (NFFC) was founded in 1986 and represents family farm, fishery, rural
and food sovereignty advocacy organizations working to change federal policy to bring fair prices, local jobs and fresh
foods to everyone. www.nffc.net
