What happens next after Trump called Canadian dairy policy 'a disgrace'?

Dive Brief:

  • President Donald Trump said Thursday that what Canada's protectionist dairy trading policies have done to American farm workers "is a disgrace," according to The New York Times. The remarks came as Trump was signing an order directing an investigation into whether steel imports harm national security.
  • Trump also spoke more broadly about how the North American Free Trade Agreement was a "disaster for our country," according to CNN. Trump has vowed to reform NAFTA, which allows free trade for some items, but allows for tariffs in others. His administration plans to roll out its ideas to renegotiate the trade deal in two weeks.
  • Trump, who was in Wisconsin earlier this week for an unrelated event, said during the visit that the U.S. would "stand up for our dairy farmers." Farmers in Wisconsin, who have been unable to find buyers for their diafiltered milk because of Canada's policy, have been particularly hard hit.

Dive Insight:

Dairy industry leaders have been hoping this issue would catch Trump's attention since he was elected. After all, this issue fits in with his campaign platform. Some critics argue that unfriendly trade policies are causing American farms to close and putting people out of work. And with Trump's popularity in rural areas, especially with farmers, the issue was ripe for his involvement.

The question is whether these statements will amount to any policy or changes in the trade agreement. At this point, it's hard to say. The issue is not necessarily a simple one, and it's not an easy fix.

Canada has had steep tariffs in place to bolster its own dairy industry, which have been allowed by NAFTA. Since the trade agreement was ratified in 1994, dairy farmers in the U.S. and elsewhere have developed a syrupy, processed high-protein product that could be used in cheese. Diafiltered milk, as it is called, could get past the tariffs and was inexpensively exported to Canadian food processors. In response, Canada created a new similar class of milk with a below-market price for its own farmers to sell to producers. Now, U.S. dairy exports are down, with more than $150 million in losses that have impacted 75 family farms in the last year.

Several petitions have been sent to policymakers looking for relief. In September, dairy groups from the U.S., Australia, Europe, New Zealand and Mexico sent letters to their leaders asking to initiate a dispute at the World Trade Organization. Before Trump's inauguration, U.S. dairy organizations reached out to him for assistance in the dispute. And last week, another letter urging Trump's assistance from the National Milk Producers Federation, the U.S. Dairy Export Council, the International Dairy Foods Association and the National Association of State Departments of Agriculture.

Careful negotiations might be able to ameliorate the dispute, but it could be difficult to get either side to budge. While Trump has a reputation for deal making in the real estate business, he has not yet had much success with it in the political realm. It's unclear how his negotiators will work to broker an agreement that will be palatable to both Canada and the U.S., or if the issue may be pushed to the wayside because of its complexity.

Canadian leaders seem to be sticking to their guns. Canadian Ambassador to the U.S. David MacNaughton said this week in a letter to governors of New York and Wisconsin that the nation is not responsible for financial losses to dairy farmers. The United States' own dairy outlook report "clearly indicates the poor results in the U.S. sector are due U.S. and global overproduction."

Canadian Prime Minister Justin Trudeau, who said he would be willing to renegotiate the agreement, told Bloomberg the U.S. exported about $413 million in dairy products to Canada last year — while just $83 million in Canadian products came into this country. Trudeau said "it's not Canada that's the challenge here."

“We’re not going to overreact,” Trudeau told Bloomberg. “We’re going to lay out the facts and we’re going to have substantive conversations about how to improve the situation.”

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Filed Under: Manufacturing Ingredients Policy
Top image credit: Gage Skidmore