Global coalition keeps heat on Canada’s dairy policy

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Canada’s adoption of new dairy policy, which opponents say further distorts and disrupts international dairy trade, continues to draw heat from an international coalition of dairy organizations.

That coalition, representing the U.S., Australia, European Union, New Zealand and Mexico and recently joined by Argentina, is again calling for trade representatives from their governments to intercede in the matter.

Leading the charge in the U.S. are the U.S. Dairy Export Council, National Milk Producers Federation and the International Dairy Foods Association.

At issue is Canada’s new national milk Class 7 pricing policy and Ontario’s Class 6, which the groups contend artificially reduce prices of Canada’s domestic milk ingredients to Canadian processors and is designed to discourage imported ingredients while undercutting competitors’ dairy prices in the international market.

In a joint letter to their trade representatives on Tuesday, the groups urged them to “pursue all avenues available to challenge these measures,” including World Trade Organization dispute settlement.

The adoption of Class 7 — and Ontario’s Class 6 before it — is inconsistent with several commitments Canada has made in regard to export subsidies, the groups stated.

Class 7 was created to address a structural surplus in Canada’s milk production, which has risen through production quotas based on estimated butter consumption, which has been growing rapidly. The co-product of milk production, milk protein, has not seen a similar increase in demand, however.

“This has resulted in a structural surplus of milk protein, exemplified by excess production of skim milk powder,” the groups stated.

With the new Class 7, milk to Canadian processors is priced at the lowest world price to produce dairy protein ingredients. That has resulted in the substitution of Canadian dairy ingredients for imported milk protein and an increase in non-WTO-compliant Canadian exports of milk protein.

Evidence of the impacts includes the cancellation of contracts by Canadian cheesemakers for U.S.-sourced ultrafiltered milk and the huge jump in Canada’s exports of skim milk power, adding to the already swelling global supply of milk protein, the groups said.

“Our respective dairy industries are firmly of the view that the operation of Ontario’s Class 6 and Canada’s Class 7 contravene Canada’s international commitments,” the groups stated.

“Canada’s increasingly protectionist policies are diverting trade with attendant global price-depressing impacts and are in conflict with the principles of free markets and fair and transparent trade,” they said.

Canada’s supply-managed dairy industry operates by allocating production quotas, setting prices that vary through a range of milk classes and controlling imports with tariff rate quotas varying between 200 percent and 300 percent, they said.

The groups are insisting that Canada remove the recently implemented policies they say are facilitating the dumping of Canadian dairy products on international markets and making already prohibitive restrictions on dairy imports even more onerous.

“This policy must stop now, before any more damage is done to American farmers and those from other nations seeking to compete on a level global playing field,” Jim Mulhern, president and CEO of National Milk Producers Federation, said.

Source: Capital Press

Link: http://www.capitalpress.com/Dairy/20170627/global-coalition-keeps-heat-on-canadas-dairy-policy

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