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Perspective:
Industry Issues

President Trump is right on Canada

Michael Dykes

Michael Dykes is president and CEO of the International Dairy Foods Association. He contributes this column exclusively for Cheese Market News®.

Following his departure from the G7 Summit in Quebec earlier this month, President Donald Trump sent off a string of tweets about Canada’s protectionist policies and sky-high tariffs on U.S. dairy imports, saying, “Not fair to our farmers!” In a series of interviews held shortly after these tweets appeared, the CEO of Saputo Inc., Canada’s largest cheesemaker, said he agrees with the frustration being expressed in the United States.

To begin the conversations, Lino Saputo Jr., CEO and chairman of Saputo Inc., insisted that the Canadian supply management system needs to remain because it has served the Canadian dairy sector since the early 1970s, providing stability for Canadian dairy farmers and supporting investment by dairy processors in providing high-quality, innovative products to meet consumer demand. He suggested eliminating his country’s controversial Class 7 ingredient pricing policy because its introduction has resulted in unintended consequences that have undermined the stability of the sector and devalued investments.

Class 7 pricing allows Canadian dairy companies to pay artificially low prices for domestic milk ingredients used to make products such as cheese and yogurt and to export the rest in the form of skim milk powder. It has effectively blocked U.S. dairy imports and disrupted global trade.

In the interviews, Mr. Saputo said Canadian dairy farmers “want their cake and want to eat it, too, which doesn’t make sense,” especially when competing in world markets. Eliminating the Class 7 pricing regime would be the logical step, he said, for concluding the dairy portion of the North American Free Trade Agreement (NAFTA) negotiations.

Thank you for those wise words, Lino. We couldn’t agree more. Saputo Inc. is a member of IDFA, and we’re pleased that Mr. Saputo has joined the calls on this side of the border for Canada to remove its controversial pricing policy.

Class 7 pricing poses serious negative consequences to the almost 3 million people employed in the U.S. dairy industry on farms and in factories across the country. It’s making milk protein so inexpensive for Canadian processors that American farmers can’t compete.

Dairy farmers and companies in Wisconsin and New York were initially hit the hardest, causing Congresswoman Claudia Tenney, R-N.Y., to estimate that, over five years, the United States will lose a billion dollars in U.S. dairy exports if Canada’s protectionist pricing policy isn’t eliminated. Senator Chuck Schumer, D-N.Y., noted that Class 7 pricing is likely a violation of Canada’s World Trade Organization (WTO) commitments, but he called for addressing it quickly through the NAFTA renegotiations rather than waiting for years for a WTO determination.

We agree there, too, and have worked with Sen. Schumer’s office on this topic. In fact, IDFA has kept up a loud and steady drumbeat on Capitol Hill, in the White House and among federal and state officials on the need to address the Class 7 pricing during NAFTA talks.

With President Trump continuing to mention U.S. dairy in trade comments, we have reason to be encouraged, but we’re not resting yet — not for a minute.

I have continued to advocate for U.S. dairy and engage with U.S. negotiators as a cleared advisor in the NAFTA renegotiation talks. I have explained that the U.S. dairy industry has been waiting for 25 years for increased market access in Canada, mostly due to the fact that our dairy products have faced tariffs of 200 percent to 300 percent for years. The latest problem with Canada’s Class 7 milk pricing greatly exacerbates existing barriers with an important trade partner.

We have consistently raised the issue on Capitol Hill as well. After conversations with many congressmen, Class 7 pricing became a topic of discussion during a meeting in April that President Trump held with cabinet officials and Republican members of Congress to discuss agricultural trade. And we’ve met individually with Ambassador Robert Lighthizer, U.S. Trade Representative; Agriculture Secretary Sonny Perdue; Ted McKinney, undersecretary for trade and foreign agricultural affairs at USDA; and several other administration officials who have responsibility for trade.

Leaders of IDFA’s member companies also have presented their concerns about Canada’s policies during our strategic fly-ins. Over the past year, we’ve arranged for dairy executives to meet with key congressmen and administration officials to explain firsthand how Class 7 pricing is affecting their businesses, American jobs and opportunities for expansion and investment. Our most recent fly-in was held earlier this month. We also held a press briefing during one fly-in so members of the media could hear directly from dairy company CEOs and report on the importance of equitable trade with Canada.

IDFA will continue to use every opportunity to urge administration officials and legislators who are working on NAFTA to tackle Canada’s unfair and protectionist policies, especially Class 7 pricing. We also are urging U.S. negotiators to incorporate language in the modernized NAFTA to ensure Canada will not devise other pricing programs or non-tariff barriers that would harm U.S. dairy trade and jobs. Otherwise, new policies will continue to erode our current trade with Canada and negatively affect U.S. trade to other markets as well.
The U.S. dairy industry supports nearly 3 million workers, generates more than $39 billion in direct wages and has an overall economic impact of more than $628 billion, according to IDFA’s economic impact tool, Dairy Delivers. With a level playing field in Canada and other export markets, we will be well positioned to keep our economic engine humming and creating more jobs and opportunities across our country.

CMN

The views expressed by CMN’s guest columnists are their own opinions and do not necessarily reflect those of Cheese Market News®.

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