Canada’s supply management sector is experiencing its usual trade-talk trepidation as the renegotiation of the North American Free Trade Agreement gets started.
Even so, dairy and poultry farmers are relying on Ottawa’s assurances at meetings through the summer that the system of domestic price setting, and the high border tariffs that support it, will not be traded away.
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The supply management sector is a potential target in any trade negotiation as it remains one of the few high-tariff, trade-protected systems in the world. But it has, so far, always made it through new trade deals, such as the Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union and the in-limbo Trans-Pacific Partnership (TPP), despite giving up some market share.
Complicating the NAFTA process is the introduction of a new class of cheaper milk in Canada that aimed to replace imported milk protein ingredients and that the Americans claim is resulting in unfair competition in their market and in other export markets.
“We were not part of the original NAFTA agreement and I don’t see why we should be part of NAFTA negotiations,” says David Wiens, vice-president of Dairy Farmers of Canada and a Manitoba dairy farmer. “Currently, Canada is in a trade deficit with the U.S. in terms of dairy by a margin of 5 to 1. I can’t understand where the U.S. is coming from, looking to Canada to open up our dairy markets.”
Still, Wiens and others agree it is challenging to read the shifting sands of American priorities related to milk in this round of negotiations.
President Donald Trump has disparaged Canadian dairy producers, but without the kind of precision in his argument that observers expect from someone with clear goals and a firm understanding of the situation.
There’s the contrast too with American Secretary of Agriculture Sonny Perdue, who has been more conciliatory on some areas, and who has said that Canada can manage its own internal supply of milk.
And although Perdue has expressed concern that the new Class 7 has displaced previous exports of ultra-filtered milk to Canada, he has also said he would like to deal with the Class 7 milk issue outside of the NAFTA negotiations.
The U.S. dairy industry also has a lot on its plate, not just Canada’s supply management.
Like numerous other U.S. ag sectors, it will have to play both offence and defence, maintaining access that it won under the 1995 agreement. Most important for dairy farmers is their access to Mexico, which has resulted in the U.S. exporting 10 times more dairy products south than it imports.
Still, Canada did agree in the stalled Trans-Pacific Partnership to open up another 3.25 per cent of the Canadian dairy market to the TPP member countries, including the United States. This is seen in some quarters as a precedent for more imports from the U.S., so NAFTA renegotiations open up another potential loss of market.
“You always want to be careful when there is any type of trade negotiation,” says Wiens. “We continue to insist that Canadian government stand firm, and that no harm be done to our industry.”
Dairy Farmers of Canada says that Canada should not be seen as a dumping ground for American over-production. A market that is 10 per cent of the size of the U.S. will not solve their oversupply problem, says Wiens.
Poultry farmers, meanwhile, point out that the United States already has significant access to the Canadian market, with the U.S. exporting an average of $200 million per year more chicken to Canada than Canada does to the U.S., based on 2012 to 2016 statistics.
Chicken hasn’t been in the NAFTA spotlight, like dairy. “The existing agreement provides stability and predictability to chicken producers on both sides of the border,” says Lisa Bishop-Spencer, manager of communications with Chicken Farmers of Canada. “The U.S. has consistently enjoyed a positive balance in its chicken trade with Canada.”
Canada has been the second-largest destination for U.S. broiler meat after Mexico in both volume and value, adds Bishop-Spencer, and when considered on a per capita basis, the value of Canadian imports of U.S. chicken is three times greater than the amount of chicken Mexico imports from the U.S.
“Import predictability has allowed our industry to thrive next door to the largest chicken producer in the world,” she says. “By matching production levels to domestic requirements, we don’t generate surpluses that would then in turn be exported, potentially displacing U.S. production and creating disruption on the U.S. market.”