On February 1, American farm, labour and civil society organizations formally asked the Biden-Harris administration to withdraw the attack on Canada’s dairy sector initiated by the United States Trade Representative (USTR) in the dying days of the Trump administration.
In the first dispute launched under the Canada-United States-Mexico Agreement (CUSMA), the U.S. is challenging how Canada has allocated additional market access, or tariff-rate quotas (TRQs), for American dairy products as agreed to during the CUSMA negotiations.
“By setting aside and reserving a percentage of each dairy TRQ exclusively for processors, Canada has undermined the ability of American dairy farmers and producers to utilize the agreed-upon TRQs and sell a wide range of dairy products to Canadian consumers,” says a USTR press release announcing the dispute in December.
Many U.S. farmers, on the other hand, see the trade challenge as an unwarranted attack on Canadian farmers and a supply management system that is increasingly coveted south of the border.
“Dairy farmers and farm workers are fighting for their survival, literally and figuratively, while U.S. trade and agriculture policy is being leveraged against them for the benefit of corporate interests,” said the U.S. farmers and civil society groups in their letter to the USTR. “This action, if implemented, would imperil the livelihoods of Canadian farmers and unionized dairy processing workers, pitting U.S. dairy farmers against working families across the border.”
When CUSMA was being negotiated, Canada’s dairy sector had already lost a significant share of our domestic dairy market to Europe via the Comprehensive Economic and Trade Agreement (CETA) and to Pacific region countries via the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Under CUSMA, Canada maintained our supply management system but conceded an increase in tariff-free dairy imports (TRQs) from the U.S.: an additional 50,000 metric tonnes of fluid milk and 12,500 metric tonnes of cheese are to enter Canada duty-free by year six year of the agreement (the summer of 2026). Canada is implementing the CUSMA agreement by issuing permits to Canadian dairy processors, allowing them to import the agreed-upon volumes of U.S.-origin milk ingredients for processing in Canada.
This is not enough for the aggressive corporate dairy lobby in the United States. The U.S. dairy lobby believes “the spirit” of the new NAFTA agreement would be for Canada to allow them to maximize potential benefits from CUSMA by importing their highest value processed products.
“We agree with the Canadian position on the merits but, more than that, and in solidarity with Canadian dairy farmers and dairy workers, we urge the Biden administration to withdraw the complaint,” the American allies countered in their letter.
Smaller American dairy farms are in a severe crisis as a result of prolonged low farm-gate prices that are below the cost of production. Paradoxically, as prices fall production increases, as farms try to make up in volume what they are losing in price. This favours the largest farms and drives smaller farms out of business.
There are fewer and larger dairy farms—some milk as many as 36,000 cows—while one-third of U.S. dairy farms disappeared in the last decade. The rapidly escalating debt and despair has created a suicide crisis in farming communities. American farmers are taking their own lives at rate 3.5 times higher than the general population.
Meanwhile, large dairy processors responded to the Covid-19 disruption by unilaterally ending contracts, leaving small farmers with no access to market at all and no way to earn a livelihood or repay their loans. If the corporate dairy lobby’s interpretation of the CUSMA agreement prevails, these companies will have even greater ability to force farm-gate prices down and impose misery on more farm families and their communities.
“My heart breaks every time I hear about yet another family dairy farm disappearing as a result of a market that is guided by corporate interests,” says Ontario National Farmers Union member and dairy farmer Arwa de Groot. “I think we should do all we can to help create a supply-managed system for our friends to the south so they too can enjoy the fruits of their labour while producing sustainable, quality milk.”
In Canada, the NFU has been supporting American farmers in their efforts to bring about a fair dairy marketing system modelled after Canada’s supply management system. In 2017, the NFU sent a letter to the previous U.S. administration explaining the benefits of the Canadian model. It said that supply management:
has worked well for over 50 years…and it protects the interests of dairy farmers, processors, and consumers without drawing upon the public purse. Farmers receive a fair return for their labour, management and investment in return for controlling their volume of production; dairy processors receive a reliable supply of milk at predictable prices; consumers receive high quality, wholesome dairy products at reasonable prices and are never faced with shortages. The whole system runs without a penny of government subsidy payments.
When Covid-19 hit, there was an abrupt change in consumer demand as people shifted to home cooking. Our supply management system was able to respond quickly and fairly, by sharing the burden of re-aligning production and processing needs. In contrast to the American experience, no Canadian dairy farmer lost their access to market as a result of the pandemic.
The supply management system also promotes environmentally friendly practices, in part due to reliable incomes that allow farmers to invest in soil-building, energy efficiency and on-farm renewable energy. With an average herd size of 89 cows, Canadian dairy farmers can integrate forage and feed production and manure management to build healthy soils, avoiding air and water pollution and high feed transportation costs. Economically stable family farms with smaller herds also go hand in hand with high animal welfare standards.
Each province has its own supply-managed quota allocation, so processing plants required to serve local farmers also provide good jobs all across the country. Looking to the future, farmers elected as dairy board directors set up new entrant programs to help young farmers get started in dairy, often giving priority to those starting certified organic farms. Canada’s dairy sector is also responding to local food system initiatives by creating opportunities for innovative on-farm processing and direct marketing approaches.
We are encouraged by our American friends’ solidarity in calling for the withdrawal of the recent trade challenge, and we hope that President Biden will resist the pressure from “big dairy” with the same courage and imagination shown in his initiative to tackle climate change. We also hope that ending this trade challenge will be the Biden-Harris administration’s first step toward implementing supply management in the United States.
Cathy Holtslander is the Director of Research and Policy at the National Farmers Union. Her work includes analysing implications of international trade agreements for farmers and rural communities, as well promoting alternatives. She is a participant in the Canadian Centre for Policy Alternative’s Trade and Investment Research Project.