President Donald Trump is considering this new deal a win and a kept campaign promise to reform US trade. He announced the dismantling of NAFTA and a new agreement with Mexico in August. But the talks with Canada didn’t go as smoothly.
At the time, Prime Minister Justin Trudeau promised he would only make a deal with Trump if it benefited Canadian families and workers. Now that the deal has been inked, some are questioning just how beneficial it will be.
A $2bn risk for Canada?
A big part of the new deal is its allowance for more access to Canada’s dairy market. Trump had complained about the high tariffs that Canada imposes on dairy imports in the past, and now the US will be able to export a larger amount of dairy products to Canadian consumers.
The decision isn’t sitting well with the Canadian dairy industry.
Pierre Lampron, president of Dairy Farmers of Canada (DFC), said, "The announced concessions on dairy in the new USMCA deal demonstrates once again that the Canadian government is willing to sacrifice our domestic dairy production when it comes time to make a deal."
“Granting an additional market access of 3.59% [up from 3.25%] to our domestic dairy market, eliminating competitive dairy classes and extraordinary measures to limit our ability to export dairy products will have a dramatic impact not only for dairy farmers but for the whole sector,” he continued.
According to DFC, the Canadian dairy industry employs more than 220,000 people and contributes about C$20bn (US$15.6bn) per year to Canada's GDP. Canadians believe the deal will weaken the market by decreasing domestic production and allowing foreign dairy products made with lower quality standards more access to shelf space.
The Dairy Processors Association of Canada (DPAC) estimated that the agreement will result in more than C$2bn (US$1.6bn) in losses from market access and implementation.
Mathieu Frigon, president and CEO of DPAC, said, "Over the past year and a half, we have repeatedly heard our government state that it would stand up for the Canadian dairy sector. However, what was agreed to [this week] demonstrates very little support for our interests."
René Moreau, president of Canadian dairy company Agropur, said, "Canada has given in again and this will have a major impact on our members in five provinces and on the entire Canadian dairy industry. These latest concessions come on top of others that were recently made, namely the import quotas granted under the Canada-Europe free trade agreement (CETA) and the concessions in the Trans-Pacific Partnership (CPTPP). The cumulative effect will clearly have an impact on Canada's dairy industry."
Or a critical win for US trade?
In contrast, US dairy farmers and organizations are responding positively to the announcement. They feel that it will help alleviate US overproduction and promise stability for struggling farmers. The deal also eliminates Canada's 'Class 7' pricing system for milk ingredients.
The American Dairy Coalition (ADC) said in a statement that it, “applauds the hard work of those who made this agreement possible and will continue to ensure the interests of the 30,000 dairy producers we represent are upheld as additional details on USMCA become available.”
The Edge Dairy Farmer Cooperative of Green Bay, Wis. also backed the deal, calling it a ‘critical win’ for its US dairy farmers.
Brody Stapel, president of Edge, said, “The partnerships built over the years with Canada and Mexico through NAFTA have been a major part of growth for our businesses. We are both relieved and excited to know that we can continue to maintain both of those markets.”
“The elimination of Canada's Class 7 pricing system will level the playing field and give US farmers the opportunity to compete in a free and fair environment. That’s all we have ever asked for,” he continued.
The National Milk Producers Federation (NMPF), the US Dairy Export Council (USDEC) and the International Dairy Foods Association (IDFA) released a joint statement commending the agreement and thanking the Trump administration for ‘fighting hard’ in negotiations.
Tom Vilsack, president and CEO of USDEC, said, “The outlines of the NAFTA pact remain intact, which will allow the US agricultural sector to continue developing new international markets for our farmers. We also need to pursue new free trade agreements with other nations and resolve our trade conflicts with China. It is imperative that the United States remains an integral player in driving the global trade agenda.”
And while US farmers are relieved by the deal, the Canadian dairy industry is far from convinced.
Pierre Lampron of DFC concluded, "Today, the message sent to our passionate, proud and quality-conscious farmers and all the people who work in the dairy sector is clear: they are nothing more than a bargaining chip to satisfy President Trump."
