Manitoba

New USMCA trade deal 'devastating' to Canada's dairy industry, farmer says

A Manitoba dairy farmer calls the United States-Mexico-Canada Agreement extremely disappointing and believes it will be devastating to his industry.

Chair of the Dairy Producers of Manitoba calls the U.S.-Mexico-Canada Agreement a death by 1,000 cuts

The new United States-Mexico-Canada Agreement includes greater access to the Canadian market for dairy products from south of the border. (CBC)

A Manitoba dairy farmer calls the United States-Mexico-Canada Agreement extremely disappointing and believes it will be devastating to his industry.

However, one dairy analyst says the deal could be good for consumers. 

The agreement, which replaces NAFTA, includes greater access for dairy products from south of the border to the Canadian market, which has been heavily protected by a supply management system.

After 14 months of intense negotiations between Canada and the U.S., a deal was reached late Sunday, only hours before a U.S.-imposed midnight deadline.

David Wiens, a producer near Grunthal, Man., and chair of the Dairy Producers of Manitoba, calls the new deal a death by 1,000 cuts.

"We're extremely disappointed with what we understand has been agreed to, with the almost 3.6 per cent access — dairy market access — being given to the U.S., as well as eliminating some of our competitive dairy class, so that will obviously have a majorly negative impact on our industry."

Canada has agreed to end what's called class 7 pricing, a milk class created in March 2017 that slashed prices on some Canadian-produced milk ingredients, such as protein concentrates, skim milk and whole milk powder, used to make cheese and yogurt. The co-ordinated price cut had made the American equivalents uncompetitive.

U.S. officials touted that change as a major breakthrough for American farmers, especially in Wisconsin and New York, where dairy farmers are eager to offload some of their product on Canada as they grapple with severe oversupply.

Watch this brief explainer of supply management:

The National takes a brief look at supply management, the argument for and against it, and why U.S. President Donald Trump hates it and complains about Canada's system. 1:11

Wiens wants an explanation from Prime Minister Justin Trudeau.

At the outset of the NAFTA talks, the U.S. demanded Canada dismantle supply management entirely — something Trudeau had always insisted was a non-starter.

"It's death by 1,000 cuts. Every time there's a trade deal, they're giving another portion of our markets away," Wiens said.

"It seems as though they wait until the 11th hour and then they give away a portion of it and it simply is devastating for the industry."

While Americans get more access to the Canadian market, the USMCA decreases Canada's access to the U.S. market, Wiens said.

"So it'll have a double impact," he said. "It's a major blow for dairy farmers in Canada but also for the other 200,000 people who are, in one way or another, involved in the dairy industry."

Jill Verwey, vice-president of Keystone Agricultural Producers, the largest farm lobby group in Manitoba, echoed Wiens' disappointment about the federal government providing more trade allowances when it comes to the dairy industry.

"Yet again, there is concession with allowing U.S. product into Canada, which, as a dairy producer, is frustrating," she said.

"It's definitely a concern."

Questions about quality

Imported dairy products don't have to meet the standards imposed on Canadian producers, said Verwey, who operates a mixed farm south of Portage la Prairie.

"The Canadian government has always maintained that they want the security and the good product in the shelves that are from Canada. Now we've got additional access of foreign product on our shelves," she said.

Verwey is still waiting to hear specific details that will reveal the full ramifications.

The Canadian Federation of Agriculture, to which KAP belongs, is looking into the "nuts and bolts of the agreement" to determine the overall effect, she said.

Verwey's not sure whether consumers will see a price drop due to the increased competition, but Wiens doubts it.

A Manitoba dairy farmer calls the United States-Mexico-Canada Agreement extremely disappointing and believes it will be devastating to his industry. 2:03

A study of the prices of liquid milk, butter and yogurt found, with the exception of liquid milk, prices are very similar between the U.S. and Canada, he said.

Considering that, he doesn't expect producers and importers to sell into Canada for less and suffer a loss.

Wally Smith, executive vice-president of Bothwell Cheese, said while the exact impacts on the Canadian dairy market are still being studied, it could lead to some financial repercussions.

"It's always a concern when dairy is used as a bargaining chip," he said.

"The Canadian government should stop, indeed, piecing off a little bit here and a little bit there every time a deal is made."

Good news for consumers?

Sylvain Charlebois, a professor at Rowe School of Business at Dalhousie University in Halifax, says he thinks more competition means the price of dairy products will come down over time. 

"I think over the next five years, we shouldn't be surprised to see our dairy counters offer cheaper dairy products, once we'll have access to more products coming from the U.S., Europe and other places," he said. 

Some grocery stores in Canada may accept losing money on dairy products, while increasing prices on other goods, said Charlebois.

"So I wouldn't be surprised to see grocers use the dairy counter as a place where you can find loss leaders as it is the case in other places around the world such as Australia, the United States," he said. 

And though Canadians like a deal, most understand someone will have to pay the price.

"I think cheaper milk is always good, but I am related to some dairy farmers in Saskatchewan," said Linda Rogala. "I don't know what effect that will have on them."

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