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Yahoo
2 days ago
- Business
- Yahoo
What the U.S. dairy industry really wants from Canada
U.S. dairy producers insist they're not looking for Canada to dismantle its supply management system, but they do want Canada to follow the letter and spirit of the existing deal that governs the dairy trade between the two countries. U.S. President Donald Trump has repeatedly blasted Canada as "unfair" and "ripping us off" with massive dairy tariffs, in a way that isn't fully accurate. However, senior figures in the U.S. dairy industry are concerned there's also some misrepresentation happening north of the border, creating a false perception of what U.S. producers are actually seeking in terms of access to the Canadian market. Shawna Morris, executive vice-president for trade policy and global affairs with the National Milk Producers Federation and the U.S. Dairy Export Council, says it's not true that her industry wants Canada to abandon its system for protecting the dairy sector. "We've never been out to eliminate Canada's supply management," said Morris in an interview from her office in Arlington, Va., just outside Washington. "It's much easier to create a boogeyman and fear-mongering around that being the goal of the Americans, but that's certainly not what our industry has advocated." Becky Rasdall Vargas, senior vice-president of trade and workforce policy at the International Dairy Foods Association lobby group, says she recognizes the Trump administration has been "fairly abrasive" in its tone toward Canada. "But at the same time, I think we feel pretty ignored by Canada in terms of our legitimate trade concerns." Two main trade irritants According to Morris and Rasdall Vargas, the U.S. industry has two main irritants with Canada: how the Canadian government allocates the existing quotas for tariff-free imports of dairy products, and how Canadian milk producers dump cheap milk protein into the international market. The import quotas negotiated under the Canada-U.S.-Mexico Agreement (CUSMA, which Americans call USMCA) are designed to give U.S. producers tariff-free access worth roughly 3.5 per cent of Canada's domestic demand for dairy products. "Three per cent is pretty limited," said Morris. "It's certainly not a situation where our industry is gonna come in and take over the Canadian dairy market." CUSMA sets import quotas for 14 categories of dairy products. That allows an annual volume of each category to enter Canada tariff-free, and any imports exceeding the quota would get hit with sky-high tariffs of 200 per cent or more. Canada's rationale for this is ensuring the domestic dairy industry thrives by effectively capping how much the U.S. can export each year, preventing cheaper American products from dominating the market. The U.S. government supports its dairy sector with hefty direct subsidies. The U.S. dairy industry says it's not asking for Canada's quotas to be increased or the tariff rates to be decreased. Rather, it wants changes to how Ottawa allocates the quotas: more specifically, who gets them. Big Canadian dairies dominate import quotas Much of the quota volume is allocated to major Canadian-owned dairy processing companies such as Saputo and Agropur. Industry analysts on both sides of the border say such companies have little incentive to import U.S. products that would compete with their own. According to the U.S. producers, this restricts their access to the Canadian market. Their evidence for that claim: Canadian trade statistics showing tariff-free imports from the U.S. have almost never reached the quota limits in any category. WATCH | What Donald Trump gets wrong (and right) about Canada's dairy tariffs: "For five years, Canada's been playing games with these tariff rate quotas," said Morris. "That's a lot of volume that should have been able to reach Canadian consumers." Despite those complaints, Canada's imports of U.S. dairy products have risen significantly since the CUSMA quotas took effect in 2020. Those imports totalled $897 million in 2024, according to Statistics Canada data, more than four times the value of imports in any year before 2020. "Trade certainly should be far higher than it is," said Morris. "That was what USMCA promised to deliver and quite frankly has fallen far short." A key change the U.S. producers would like to see is for Canada to grant retailers and the food-service sector a share of the tariff-free quotas, allowing them to import some U.S. dairy products directly. The U.S. industry also wants Canada to be far stricter in taking away allocations from importers that fail to use their full quota in a given year. While a bill that Parliament passed in June bars Ottawa from agreeing to raise the dairy import quotas or lower the tariffs, it doesn't prevent other changes to the system, leaving Canadian trade negotiators some wiggle room. WATCH | Canada's supply management system, explained: 'An inherent mismatch' The other chief complaint from the U.S. focuses on Canada's cheap exports of milk proteins, also described as milk solids, such as skim milk powder. The Americans argue that because Canada's supply management system keeps domestic prices artificially high, Canada can sell its excess production of milk proteins internationally at artificially low prices, undercutting the competition. "It frankly makes no sense that you could have one of the highest milk prices in the world and yet be exporting dairy protein at some of the lowest prices globally," said Morris. "That's just an inherent mismatch." Canada's pricing of milk solids for the export market is currently the subject of a U.S. International Trade Commission investigation, ordered by the Trump administration, with a hearing scheduled for Monday. Dairy Farmers of Canada declined a request for comment on the case. "During the recent election, all major parties expressed support for supply management and stated that it would be off the table in upcoming trade negotiations," the organization said in a news release in June. The Trump administration is not the first to accuse Canada of breaching CUSMA terms on dairy. Joe Biden's administration twice took legal action over Canada's handling of the dairy quotas, claiming it was unfairly undermining U.S. access to the Canadian market. The U.S. won the first dispute, which it launched in 2021, but failed to win the second, in 2023. Now in 2025, Rasdall Vargas says her industry wants Canada to be willing to hear its true concerns and do something about them. "Ultimately, when we have a trading partner who isn't taking our concerns seriously until they're threatened to do so, it's also not a good feeling from our side," she said. Whatever anyone thinks about Trump's bluster on Canadian dairy, Rasdall Vargas believes it's having an impact. "I think that's the president's way of having our back, probably more abrasively than Canada would like," she said. "I will say I've never seen Canadian dairy interests take U.S. concerns about Canadian dairy policy more seriously than in the past six months."
CBC
3 days ago
- Business
- CBC
What the U.S. dairy industry really wants from Canada
U.S. dairy producers insist they're not looking for Canada to dismantle its supply management system, but they do want Canada to follow the letter and spirit of the existing deal that governs the dairy trade between the two countries. U.S. President Donald Trump has repeatedly blasted Canada as "unfair" and "ripping us off" with massive dairy tariffs, in a way that isn't fully accurate. However, senior figures in the U.S. dairy industry are concerned there's also some misrepresentation happening north of the border, creating a false perception of what U.S. producers are actually seeking in terms of access to the Canadian market. Shawna Morris, executive vice-president for trade policy and global affairs with the National Milk Producers Federation and the U.S. Dairy Export Council, says it's not true that her industry wants Canada to abandon its system for protecting the dairy sector. "We've never been out to eliminate Canada's supply management," said Morris in an interview from her office in Arlington, Va., just outside Washington. "It's much easier to create a boogeyman and fear-mongering around that being the goal of the Americans, but that's certainly not what our industry has advocated." Becky Rasdall Vargas, senior vice-president of trade and workforce policy at the International Dairy Foods Association lobby group, says she recognizes the Trump administration has been "fairly abrasive" in its tone toward Canada. "But at the same time, I think we feel pretty ignored by Canada in terms of our legitimate trade concerns." Two main trade irritants According to Morris and Rasdall Vargas, the U.S. industry has two main irritants with Canada: how the Canadian government allocates the existing quotas for tariff-free imports of dairy products, and how Canadian milk producers dump cheap milk protein into the international market. The import quotas negotiated under the Canada-U.S.-Mexico Agreement (CUSMA, which Americans call USMCA) are designed to give U.S. producers tariff-free access worth roughly 3.5 per cent of Canada's domestic demand for dairy products. "Three per cent is pretty limited," said Morris. "It's certainly not a situation where our industry is gonna come in and take over the Canadian dairy market." CUSMA sets import quotas for 14 categories of dairy products. That allows an annual volume of each category to enter Canada tariff-free, and any imports exceeding the quota would get hit with sky-high tariffs of 200 per cent or more. Canada's rationale for this is ensuring the domestic dairy industry thrives by effectively capping how much the U.S. can export each year, preventing cheaper American products from dominating the market. The U.S. government supports its dairy sector with hefty direct subsidies. The U.S. dairy industry says it's not asking for Canada's quotas to be increased or the tariff rates to be decreased. Rather, it wants changes to how Ottawa allocates the quotas: more specifically, who gets them. Big Canadian dairies dominate import quotas Much of the quota volume is allocated to major Canadian-owned dairy processing companies such as Saputo and Agropur. Industry analysts on both sides of the border say such companies have little incentive to import U.S. products that would compete with their own. According to the U.S. producers, this restricts their access to the Canadian market. Their evidence for that claim: Canadian trade statistics showing tariff-free imports from the U.S. have almost never reached the quota limits in any category. WATCH | What Donald Trump gets wrong (and right) about Canada's dairy tariffs: Is Trump right about Canada charging 250% dairy tariffs? | About That 4 months ago President Donald Trump says Canada has been ripping off the United States, imposing tariffs of up to 400 per cent on imported American dairy products. Andrew Chang breaks down Trump's claims, explaining how dairy tariffs work and how likely it is that anyone is actually paying such sky-high charges. Images supplied by Reuters, Getty Images and The Canadian Press. Additional credits (Credit: 9:17 Skotidakis/Facebook), (Credit: 9:21 Elite Dairy). "For five years, Canada's been playing games with these tariff rate quotas," said Morris. "That's a lot of volume that should have been able to reach Canadian consumers." Despite those complaints, Canada's imports of U.S. dairy products have risen significantly since the CUSMA quotas took effect in 2020. Those imports totalled $897 million in 2024, according to Statistics Canada data, more than four times the value of imports in any year before 2020. "Trade certainly should be far higher than it is," said Morris. "That was what USMCA promised to deliver and quite frankly has fallen far short." A key change the U.S. producers would like to see is for Canada to grant retailers and the food-service sector a share of the tariff-free quotas, allowing them to import some U.S. dairy products directly. The U.S. industry also wants Canada to be far stricter in taking away allocations from importers that fail to use their full quota in a given year. While a bill that Parliament passed in June bars Ottawa from agreeing to raise the dairy import quotas or lower the tariffs, it doesn't prevent other changes to the system, leaving Canadian trade negotiators some wiggle room. WATCH | Canada's supply management system, explained: How Canada's dairy supply management system works — and why Trump hates it 6 months ago 'An inherent mismatch' The other chief complaint from the U.S. focuses on Canada's cheap exports of milk proteins, also described as milk solids, such as skim milk powder. The Americans argue that because Canada's supply management system keeps domestic prices artificially high, Canada can sell its excess production of milk proteins internationally at artificially low prices, undercutting the competition. "It frankly makes no sense that you could have one of the highest milk prices in the world and yet be exporting dairy protein at some of the lowest prices globally," said Morris. "That's just an inherent mismatch." Canada's pricing of milk solids for the export market is currently the subject of a U.S. International Trade Commission investigation, ordered by the Trump administration, with a hearing scheduled for Monday. Dairy Farmers of Canada declined a request for comment on the case. "During the recent election, all major parties expressed support for supply management and stated that it would be off the table in upcoming trade negotiations," the organization said in a news release in June. The Trump administration is not the first to accuse Canada of breaching CUSMA terms on dairy. Joe Biden's administration twice took legal action over Canada's handling of the dairy quotas, claiming it was unfairly undermining U.S. access to the Canadian market. The U.S. won the first dispute, which it launched in 2021, but failed to win the second, in 2023. Now in 2025, Rasdall Vargas says her industry wants Canada to be willing to hear its true concerns and do something about them. "Ultimately, when we have a trading partner who isn't taking our concerns seriously until they're threatened to do so, it's also not a good feeling from our side," she said. Whatever anyone thinks about Trump's bluster on Canadian dairy, Rasdall Vargas believes it's having an impact. "I think that's the president's way of having our back, probably more abrasively than Canada would like," she said.
Globe and Mail
14-07-2025
- Business
- Globe and Mail
Canada flouting USMCA with dairy import quota rules, says U.S. industry
U.S. dairy exporters are demanding Canada rewrite its rules around who can import cheese, milk and other products as President Donald Trump threatens to impose a 35-per-cent tariff on Canadian goods beginning Aug. 1. Last week, Mr. Trump sent a letter to Prime Minister Mark Carney threatening to impose more tariffs on a number of Canadian goods and complaining about Canada's protectionist measures on supply-managed products such as dairy. The deadline for the Canada-U.S. trade deal has been postponed from July 21 to Aug. 1. U.S. exporters want Canadian retailers and food-service companies to be able to import dairy tariff-free under the U.S.-Mexico-Canada Agreement. But Canada's rules allow only processors and distributors to import U.S. dairy products without facing levies that can surpass 250 per cent. A limited amount can be imported without duties under a tariff rate quota, or TRQ. The U.S. has long argued Canada's TRQ licence rules are a breach of USMCA, and are why exporters have been unable to sell into the Canadian market at the volumes negotiated in 2018. 'It is just ridiculous that you would give the vast majority of the tariff rate quota licences to our competitors in the Canadian dairy industry who – frankly – have their own motivations for what they want to bring in,' said Shawna Morris, executive vice-president of trade policy and global affairs at the U.S. Dairy Export Council. Canadian grocers and distributors also say the system benefits the dairy industry, and reduces the variety of products available to consumers from U.S. producers. The dairy industry's outsized political influence, explained in charts Bill protecting supply management from trade negotiations to become law Canada has so far held firm against the U.S.'s demands. However, the stakes are higher today now that Washington and the U.S. dairy industry has Canada's supply-management system in its sights. If U.S. exporters prevail with securing changes to the quota system, shoppers here could see a wider range of products on their grocer's shelves at the expense of the Canadian dairy industry. The U.S. Dairy Export Council has been assured by the Trump administration that overhauling the rules is a priority, Ms. Morris said. However, the government of Canada is not planning to change the administration and allocation policies under USMCA, Jason Kung, spokesperson for Global Affairs Canada, said in a statement. 'This government remains committed to maintaining, protecting and defending supply management, and standing up for the industries, farmers, workers and the communities they support.' The USMCA trade agreement gave the U.S. dairy industry expanded access to approximately 3.5 per cent of the Canadian domestic market. The value of exports has grown to US$1.18-billion in 2024 from US$697.09-million in 2016, according to the United States Department of Agriculture. But the U.S. has not penetrated the market to the degree it negotiated, Ms. Morris said. Market forces are a factor. The fill rate – the percentage of the tariff-free quota actually used to import products – is high for foods like butter and cheese, where there is strong consumer demand. However, the rate falls far below its limits for a number of products, Ms. Morris said. She blames Canada's rules around imports. These processors directly compete with the U.S. dairy exporters, so have less incentive to import, Ms. Morris said. The licensing rules also skew the type of product imported into Canada, said Santo Ligotti, spokesperson for the Retail Council of Canada (RCC). The RCC has long advocated for retailers to be allocated tariff-rate quotas under USMCA, he said. But the government is not prioritizing retailers or Canadian consumers, he said. 'When it comes to dairy, the Canadian government always looks to favour producer interests over consumer interests,' Mr. Ligotti said. Consider cheese. In 2024, 83 per cent of the TRQ allotment for 'cheese of all types' was filled – the highest rate across all categories. Because the licences are granted at a higher rate to processors, the vast majority falls into three categories: mozzarella, cheddar and grated and powdered cheese. These processors can also import cheese under a second category: industrial. This includes bulk cheeses used for food manufacturing. Processors import less of the available quota under this category. This is unfair and goes against the spirit of the trade agreement and free market economics, said Joe Dal Ferro, president Finica Food Specialties, a distributor that sells cheese to all major retailers across Canada. The processor is not interested in providing variety to the Canadian consumer, said Mr. Dal Ferro, who is also chair of the International Cheese Council of Canada. They will only import cheese that does not compete with what they offer, he said. The U.S. launched complaints against Canada in 2021 and 2023, but the panel found in the last dispute that Canada was not in breach of its commitments under USMCA. The panel decided that the trade deal gave Canada the right to exercise broad discretion in how it allocates quota, said Matthew Kronby, a partner in the international trade and investment practice at Osler, Hoskin & Harcourt LLP. Mr. Kronby has represented the Canadian dairy industry in its trade disputes with the U.S. Total market access lost to foreign competitors for dairy products under all Canada's trade commitments, including USMCA, was estimated at approximately 10 per cent of domestic production once the agreements will be fully implemented, Agriculture and Agri-Food Canada said in a statement. Dairy Farmers of Canada estimates the loss to be closer to 18 per cent of domestic production. 'When previous governments conceded access to our domestic market, we yielded part of our milk production to other countries in perpetuity,' said David Wiens, president of Dairy Farmers of Canada. 'That's market share our farmers will never recover.'
