Ontario dairy farmers disappointed with new USMCA trade deal
'We can't compete on a level playing field,' says Graham Lloyd, CEO of Dairy Farmers of Ontario
Ontario dairy farmers are expressing disappointment as details begin to emerge about the United States-Mexico-Canada Agreement (USMCA) — the provisional deal to replace NAFTA — which contains a major concession from Canada on dairy.
The new deal would give U.S. farmers greater access to Canada's dairy industry, worth about 3.6 per cent of Canada's current dairy market, according to the Dairy Farmers of Canada.
The U.S. had negotiated access worth about 3.25 per cent of Canada's market in the Trans-Pacific Partnership, but then withdrew, leaving that share of Canada's market now available to dairy products from the countries that remain in the agreement, like New Zealand and Australia.
Foreign Affairs Minister Chrystia Freeland said Monday that farmers will receive compensation from the federal government, but details weren't immediately available.
Adjusting won't be easy
"It definitely feels like a loss for the dairy industry today," said Peter Ruiter, a dairy farmer in Nepean.
Ruiter recently jumped back into the industry after a barn fire last year. If he knew about this change beforehand, he said, it might have affected his decision.
The immediate impact is that he won't be able to produce as much milk, he said.
"And now today I feel smaller and I'm going to have to adjust and it will not be easy," he said.
"It just goes on and on, like you keep whittling away, and there won't be much left."
Deal means less local milk production say farmers
Graham Lloyd, CEO of Dairy Farmers of Ontario, agreed, saying the deal will result in reduced milk production because the markets will be filled with subsidized products from the U.S., and Canadian farmers won't be able to compete fairly.
Lloyd said about 18 per cent of Canada's dairy market is open to tariff-free imports. He also said the U.S. overproduces milk products, and that Canada has provided a market to dump them in.
"We can't compete on a level playing field with those products because their governments have massive subsidies for that, and then in this new deal Canada has been limited to some extent on even how much you can export," said Lloyd.
"Our first reaction is we're quite disappointed."
Lloyd said another significant development is the dismantling of Canada's class 7 milk ingredient pricing strategy, a solution to Canada's skim milk surplus that was negotiated between Canadian farmers and processors.
The more people consume butter, as they have in recent years, the more skim milk is generated. The co-ordinated price cut had made American equivalents uncompetitive by removing the incentive for dairy processors to use American diafiltered milk products,
Lloyd said this change will significantly affect farmers and processors because that class was created to find a competitive level of milk production.
"And so we lose that opportunity to be competitive against that, those products. There's some indication that they will permit some of that product, but the details are still to be determined," he said.
Lloyd also believes the deal will create no price difference for consumers.
Changes beneficial, professor says
Ian Lee, an associate professor at Carleton University's Sprott School of Business, said that although there will be a short-term adjustment, the deal will benefit the dairy industry and consumers in the long term.
Lee said there's increased prosperity when an economy is opened up to competition, noting that the poorest countries in the world are the most protected and closed.
Canada's dairy industry, he argued, has been protected from competition and therefore hasn't challenged to grow and change.
"It's going to be beneficial because they have had zero, zero incentive to be innovative," Lee said.
"It's the only industry, by the way, that isn't exporting. If you look at all our agricultural sectors, the beef agricultural sector export market is booming, so are hogs and the other markets. The only one that isn't is supply management.
"It's turned them into a very, very uninnovative and non-competitive sector."
While U.S. farmers have greater access to the Canadian market, supply management overall has been maintained. But that doesn't cut it for David Wiens, vice-president of Dairy Farmers of Canada.
"What the prime minister needs to explain to Canadian dairy farm families and the other 200,000 people involved in this industry is how this deal is supporting supply management. That is not at all clear to me, nor will it be clear to other farmers as they realize what's happened here," said Wiens.
Canada's supply management system puts quotas on the amount of milk farmers are allowed to produce, eliminating over-production, which can drive down prices. It also puts high tariffs on foreign producers trying to sell in the Canadian market, limiting foreign products on Canadian shelves.
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With files from CBC Radio's Ottawa Morning