A recent trade deal signed by Prime Minister Trudeau has local dairy farmers concerned. The trade deal between the U.S., Mexico, and Canada—dubbed USMCA by U.S. President Trump—has been signed by the Prime Minister but has yet to be ratified by all three countries. The new deal is intended to replace the North American Free Trade Agreement (NAFTA), and after 14 months of negotiations the Prime Minister is calling it a good deal for Canada.
“It will be good for Canadian workers, good for Canadian business, and good for Canadian families,” said Trudeau at a press conference.1
But Canadian dairy farmers don’t agree.
“The announced concessions on dairy in the new USMCA deal demonstrates once again that the Canadian government is willing to sacrifice our domestic dairy production when it comes time to make a deal,” says Pierre Lampron, president of Dairy Farmers of Canada, a lobbyist group. “The government has said repeatedly that it values a strong and vibrant dairy sector—they have once again put that in jeopardy by giving away more concessions.”2
Part of the trade deal will directly affect supply management, a system of control that is unique to Canadian producers and which was established to benefit farmers, processors, and consumers alike. While Canadian dairy farmers mainly produce for domestic markets, they have been building on a small but growing export program as well.
Supply management regulates Canadian dairy production, prices, and imports. Introduced in the 1960s, it allows dairy farmers to purchase quota allotments, regulating the amount of dairy products they are allowed to produce and sell. It serves to prevent over-production which can cause large price swings in the market. Essentially, through the oversight of federal and provincial marketing boards, farmers are able to carefully match the supply of milk produced to the demand by Canadian consumers.
In turn, farmers are assured a fair and stable price for their products without having to rely on government funding or subsidies.
“Our model of supply management is weakened every time there is more access given in a trade agreement,” says Dairy Farmers of Manitoba chairperson David Wiens. “That is partly due to the fact that we then have less control over milk supply.”
Wiens says there are three important pillars to supply management and the trade deal puts them all at risk: regulated pricing of Canadian dairy products, control of tariffs on dairy products, and disciplined production which meets but does not exceed Canadian market demands.
“This agreement means there will be less Canadian milk required for the Canadian markets, which will limit the growth of farms and processing plants,” Wiens says. “It’s important to have continuous growth in any strong industry.”
There will be less Canadian milk required because more tariff-free import milk products will be coming into the country. In the past, Canada has maintained strict control over imported dairy products to provide a fair chance for Canadian farmers to succeed.
In recent years, the Canadian government has been loosening those controls through trade agreements with the European Union and the Pacific Trade Alliance which includes countries in Asia and South America. This USMCA agreement will allow an additional 3.9 percent of the Canadian market to be filled by import products, almost exactly the amount of milk produced by Manitoba dairy farmers. Between all recent trade agreements, the total tariff-free access now comes to a whopping 18 percent of the market share which was once dominated by Canadian farmers for Canadian consumers.
“My biggest concern is how many more trade deals and how much more market share they will keep giving away,” says Jake Stephens of Trehane Holsteins, located near Niverville. “This trade, as well as any more that are made, will affect my life on our dairy farm and whether there will be a dairy market left for another generation to come.”
Another area of grave concern is how the trade agreement will affect Canada’s Class 7 Milk Protein, a classification for a specific milk ingredient derived from raw milk. Milk proteins are used in cheese production as well as infant formula, energy drinks, and meal replacement products.
With a growing consumer demand for butter, which uses the milk fat ingredient, processors have found themselves with an excess of the remaining milk product but have found unique ways of turning it into a useful milk protein. Canada’s exports of milk protein have been growing due to its highly competitive pricing.
“The U.S. demanded that we abandon our Class 7 Milk Protein class,” says Wiens. “Canadian processors were very successful in competing against their American counterparts and the American government wanted to ensure that we would no longer be able to compete with them in world markets. With USMCA, they will force us to abandon this program and to make sure we can’t compete against them in the future. The Canadian government has agreed to put a surcharge on our dairy exports to help ensure that we will never be able to be competitive against the American dairy industry again.”
Stephens says this new regulation against Class 7 could see his quota cut even further depending on the exact terms of the agreement.
“With the decrease of the market, we will have to reduce production by the percents taken away, but we still have the facilities for the size that we were, which means we still have the cost of the assets to pay for without the income we used to have,” Stephens says.
The new trade deal may also have a direct effect on consumers who will have access to import products that don’t match the high quality and principled standards Canadian dairy producers adhere to.
“Products imported from the U.S. will ultimately have been made from milk produced on large industrialized factory farms where the main focus is bottom line with little care given to sustainable farming, including things like milk quality, food safety, animal care, and care for the environment,” Wiens says. “Also, there is likely artificial-production hormones used to get greater production from their cows. The use of this hormone is banned in Canada.”
Glendon Graye of Graylane Holsteins and Jerseys Ltd., a dairy farm located southeast of Niverville, says Canada’s model of supply management allows domestic dairy producers to maintain higher standards without cutting corners and lowering milk quality. He’s hopeful that Canada’s model won’t be sacrificed to trade deals.
“Processors that include the 100 percent Canadian or the Dairy Farmers of Canada logos on their products are guaranteeing the milk used came from a farm held accountable to the standards developed by Canadians,” says Graye. “Without these labels, the processor is likely diluting a product that I proudly produced with something that came from a farm that has no connection to our communities or responsibility to its consumer.”
Stephens is not as optimistic.
“Since we have had two different governments in power, both have given a fraction of the market away,” Stephens says. “I, unfortunately, wouldn’t be shocked to see them dismantle supply management as time goes on if they keep using our food industry as a bargaining chip when it comes to trade wars. I understand trade deals will always have some give and take, but I would like to see Canada not give up its control and quality of food products.”
Wiens says America’s interest in the Canadian market stems from a surplus of milk being produced on their side of the border. Their surplus is a result of the lack of mechanisms in place to control production.
“The American government wants access to our dairy markets in Canada so that they can dump their surplus dairy products in Canada,” says Wiens. “For example, last year their government paid to dump over 100 million gallons of milk because they produced too much for their domestic market. They also have programs where they will buy millions of dollars’ worth of cheese simply to remove it from a saturated marketplace. Unfortunately, with the Canadian market being one-tenth the size of the U.S. market, dumping dairy products into Canada will not alleviate the plight of their dairy farmers, but it will be very damaging for our dairy industry in Canada.”
The Canadian government isn’t denying that domestic dairy producers will feel an aftershock. Because of that, Foreign Affairs Minister Chrystia Freeland says Canadian dairy farmers can expect to be compensated for their losses, although the amount and type of compensation has yet to be determined.
“Canadian dairy farmers wanted to continue earning all our revenue from the marketplace where we did not have to rely on subsidies and other compensations like they do in the U.S.,” Wiens says. “A compensation package can never replace what we had. Unfortunately, our pleas fell on deaf ears and we no longer know what the future has in store for us. Our worst fear is that the Canadian government is exposing us to a death by a thousand cuts when they simply view the Canadian dairy industry as a bargaining chip to get other things in different trade agreements. We will continue to push back against these kinds of trade deals. Enough is enough!”
Consumers could also be angered by these government compensation packages. This means, in essence, that consumers pay for their milk products twice—first in the grocery store and again through their taxes.
Graye and Wiens are both hopeful that the Canadian consumer will tip the scales in favour of Canadian dairy producers.
“My greatest personal concern is that our consumers will be misled by labelling on the products they put in their grocery carts,” Graye says. “I believe Canadians have faith in the quality and standards which all Canadian dairy farmers are held to, and also the conviction to support local business and the ripple effects of doing so.”
“The support we have received from Canadians across the country has been heart-warming and allows us to dare to hope for a sustainable future,” adds Wiens.
