The U.S. and Canada are significant trading partners with each other. According to the Office of the U.S. Trade Representative, Canada was the largest market for U.S. goods exports in 2015, and it also ranked as the second-largest source of goods imported into the U.S. However, the issue surrounding ultrafiltered milk has soured some of this positive relationship. The dairy dispute between the U.S. and Canada is complex and contentious. Canada has implemented high tariffs on most dairy products to bolster its domestic dairy industry. Consequently, the U.S. and other countries began exporting a processed, high-protein product known as ultrafiltered milk, which managed to circumvent these tariffs. Canadian food processors favored this cheaper import, prompting Canada to establish a new category of milk that local farmers could sell at below-market prices to producers. This led to a decline in Canadian purchases of imported ultrafiltered milk products, resulting in U.S. dairy producers facing an oversupply of ultrafiltered milk, thus causing financial strain for American dairy farmers. “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.
To assist the struggling dairy industry, which has been advocating for nearly two decades, relaxed FDA regulations on the use of ultrafiltered milk in cheese production may provide relief. John Umhoefer, executive director of the Wisconsin Cheese Makers Association, mentioned to the LaCrosse Tribune that “it’s more practical and economical to ship this liquid, filtered milk to cheesemakers, other dairy manufacturers, and even food processors in this concentrated form.” Previously, the FDA permitted limited use of ultrafiltered milk in cheese products, but it could only be utilized if produced in the same facility as the cheese, preventing shipments from external sources.
Dykes emphasized that ultrafiltered milk is just one aspect of the broader challenges in U.S.-Canadian trade. Canadian dairy farmers have also increased production to the point of oversupply, leading them to sell powdered skim milk on the international market at prices significantly lower than those of the U.S. and other countries. Earlier this summer, Dykes and other national dairy organizations from the U.S., New Zealand, Australia, Mexico, Argentina, and the E.U. sent letters to their respective national trade ministers urging them to petition the World Trade Organization regarding Canada’s cross-subsidization practices in the global market.
As for how this dairy issue may influence the renegotiation of the North American Free Trade Agreement, the future remains uncertain. Nonetheless, the escalating tension over ultrafiltered milk does not bode well for U.S.-Canadian relations. President Trump has been vocal about characterizing NAFTA as a “disaster for our country,” allowing free trade for certain products while imposing tariffs on others. He previously condemned Canada’s protectionist dairy policies as “a disgrace” to American farm workers.
Conversely, Canadian leaders hold 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 stated that Canada is not to blame for the financial difficulties faced by dairy farmers. He highlighted that the U.S. dairy outlook report “clearly indicates the poor results in the U.S. sector are due to U.S. and global overproduction.” In this context, the rising demand for alternative dairy products, such as calcium citrate drinks, could offer some reprieve for U.S. dairy producers as they adapt to the evolving market landscape. The need for innovative products like calcium citrate drinks may become increasingly relevant as the dairy industry looks for new avenues to mitigate losses and enhance profitability in the face of ongoing trade challenges.