By Eric Frykberg
The Canadian Government is being accused of “delinquent” behaviour in a second trade row with dairy exporting nations.
The charge alleges “brazen” violation of Canada’s obligations under the World Trade Organisation (WTO).
The accusation comes from dairy industry bodies in three countries: New Zealand, Australia and the United States.
They have written to their respective Governments seeking support in a battle against Canadian state subsidies for dairy exports to third markets.
The row follows an earlier one over Canada’s blockage of dairy goods from New Zealand and other exporting nations in violation of the Comprehensive and Progressive Trans Pacific Partnership (CPTPP). That battle is currently stalemated, despite a series of judgements against Canada and in favour of New Zealand.
This dispute is different, because it involves Canadian exports, not imports, but it has an overlap, in that it stems from Canada’s comprehensive state regulation of its dairy industry.
That regulation, which imposes production volumes and price guarantees, effectively squeezed out New Zealand sales. But it also leaves a surplus of dairy goods available for cut-price exports to third countries.
“Canada is brazenly maintaining a policy approach that is at odds with its international trade obligations,” the letter says.
It has been signed by several organisations: the Dairy Companies Association of New Zealand (DCANZ), the Australian Dairy Industry Council, the American National Milk Producers Federation and the US Dairy Export Council. It was addressed to politicians in the three complainant countries, including the US Trade Representative Katherine Tai, the Australian Trade Minister Don Farrell and New Zealand’s Trade Minister Todd McClay.
DCANZ executive director Kimberly Crewther says the latest row is an additional dispute to the one about CPTPP dairy quotas.
“It is an ongoing battle to ensure Canada upholds its trade commitments on dairy,” she says.
“DCANZ is pleased to be working with industry organisations from other dairy exporting nations which share the objective of holding Canada to account for its dairy trade commitments.”
Crewther adds she wants Governments of the three countries to apply “collective and coordinated action, using all tools available, to address the mechanisms that enable these exports to be dumped into world markets.”
In an initial response, McClay says he shares the concerns of the dairy industry bodies in all three countries.
“The Government is committed to protecting our exporters’ interests and to holding trading partners to account when they fail to comply with their international obligations,” he says, citing Government involvement in the CPTPP battle.
In their letter, the dairy industries from the three countries say that while Canada’s economic policies are complex, the issues are simple.
“It is well known that Canada’s supply management system generates a surplus of dairy-solids non-fat (SNF) that is not absorbed in its domestic market,” the letter says.
“Canada’s milk pricing mechanisms are purposefully designed to incentivise the disposal of that surplus on global markets through intentional under-pricing of dairy proteins. Canadian processors are accessing SNF at prices significantly less than the Canadian cost of production, leading to the unfair export of a range of dairy protein products at artificially low prices.
“Canada is brazenly maintaining a policy approach that is at odds with its international trade obligations.”
The letter says a similar dispute was lost by Canada in the early 2000s, and the revived practice is in contravention of both the WTO and the U.S.-Mexico-Canada Agreement (USMCA), which replaced the old NAFTA.
“The unconstrained growth of Canadian artificially low-priced milk protein exports undercuts the price of products sourced from elsewhere, depressing the market for these products and displacing longstanding commercial relationships.
“Individually and collectively, these impacts undermine the commercial competitiveness of our exporting companies and reduce returns to hard-working dairy farmers.”
The letter adds there is an imminent prospect of further Canadian investment in this trade, which would serve to further prejudice the trade interests of the dairy industries in the three countries.
“If Canada is allowed to get away with its current practices, new processing capacity will be built and expand the harm being caused to legitimate, commercially priced dairy production and exporting interests in each of our regions.
“We have been fighting against trade manipulation by Canada on dairy products for nearly 25 years, yet Canada continues to find ways to evade its trade commitments, the letter says.
“This underscores the urgency for action to be taken to challenge Canada’s actions and insist on change.
“While the means to address Canada’s trade delinquency may differ between our governments, the ends we seek are the same. The problem is not going away and curbing the harm and ongoing risk that unfair and anti-competitive Canadian exports create for our industries is now a matter of urgency,” the letter concludes.
This issue has arisen as Canada nervously awaits tariff increases that have been promised by the incoming US President, Donald Trump. It is not clear what impact this looming danger will have on the tri-lateral row over subsidised exports.
A response from the Canadian Government has been sought.
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