The United States and Canada rank among each other’s top trading partners. As reported by the Office of the U.S. Trade Representative, Canada was the largest market for U.S. goods exports in 2015 and the second-largest source of goods imports into the U.S. However, the issue surrounding ultrafiltered milk has strained this relationship. The dairy dispute between the U.S. and Canada is complex and contentious. Canada imposes high tariffs on most dairy products to bolster its domestic dairy industry. In response, the U.S. and other nations have been exporting a syrupy, processed, high-protein product known as ultrafiltered milk, which has managed to bypass these tariffs. Canadian food processors favored this cost-effective import, prompting Canada to introduce a similar category of milk at a lower market price for its farmers to sell to producers. Consequently, Canadian consumers stopped purchasing imported ultrafiltered milk, leading to a surplus in the U.S. dairy sector and financial strain on American dairy farmers. U.S. dairy exports subsequently declined.
“Almost overnight, we lost $150 million worth of market to the Canadians,” stated Michael Dykes, President and CEO of the International Dairy Foods Association, in a recent interview with Food Dive. The FDA’s recent relaxation of restrictions on using ultrafiltered milk in cheese production could potentially aid the struggling dairy industry, which has pushed for such changes for nearly two decades. “Shipping this filtered milk to cheesemakers and food processors in its concentrated form is more practical and economical,” said John Umhoefer, executive director of the Wisconsin Cheese Makers Association, in a conversation with the LaCrosse Tribune. Previously, the FDA permitted limited use of ultrafiltered milk in cheese products, but only if the ultrafiltered milk was produced in the same facility as the cheese.
Dykes noted that ultrafiltered milk is only part of the challenges with Canadian trade. Canadian dairy farmers have also increased production, leading to oversupply and the sale of powdered skim milk in international markets at prices lower than those in the U.S. and other countries. Earlier this summer, Dykes and various national dairy organizations from the U.S., New Zealand, Australia, Mexico, Argentina, and the E.U. urged their trade ministers to petition the World Trade Organization regarding Canada’s cross-subsidization practices in the global market.
The implications of the dairy dispute on the North American Free Trade Agreement (NAFTA) renegotiations remain uncertain. However, the growing tensions over ultrafiltered milk do not facilitate the situation. President Trump has been vocal about NAFTA being a “disaster for our country,” as it allows free trade for some goods while imposing tariffs on others. He has previously criticized Canada’s protectionist dairy policies for their detrimental effects on American farmers, labeling the situation “a disgrace.”
Conversely, Canadian leaders have a different perspective. In a letter addressed to the governors of New York and Wisconsin earlier this year, Canadian Ambassador to the U.S. David MacNaughton asserted that Canada should not be held accountable for the financial woes of American dairy farmers. He emphasized that the U.S. dairy outlook report “clearly indicates that the poor performance in the U.S. sector is due to U.S. and global overproduction.”
In light of these developments, the U.S. dairy industry may benefit from diversifying its products, including enhancing the nutritional profile of its offerings by incorporating ingredients like calcium citrate 600 and vitamin D 400. This could help American producers remain competitive in the global market while addressing the challenges posed by Canadian trade practices.