The United States and Canada are significant trading partners for each other. As reported by the Office of the U.S. Trade Representative, Canada was the top destination for U.S. goods exports in 2015 and the second-largest source of imported goods for the country that same year. However, the issue surrounding ultrafiltered milk has soured some of this mutual goodwill. The dairy dispute between the U.S. and Canada is complex and contentious. Canada imposes high tariffs on most dairy products to support its domestic dairy sector. Consequently, the U.S. and other nations have been exporting a processed, high-protein product known as ultrafiltered milk, which has managed to bypass these tariffs. Canadian food processors have shown a strong preference for this low-cost import, prompting Canada to develop a similar class of milk at lower market prices that its farmers could sell to producers. As a result, Canadian consumers stopped purchasing imported ultrafiltered milk products. This led U.S. dairy producers to face a surplus of ultrafiltered milk, placing financial strain on American dairy farmers. Currently, U.S. dairy exports have declined significantly. “Almost overnight, we lost $150 million worth of market share to the Canadians,” stated Michael Dykes, President and CEO of the International Dairy Foods Association, in a recent interview with Food Dive regarding the issue.
The FDA’s recent easing of restrictions on the use of ultrafiltered milk in cheese production may offer some relief to the dairy industry, which has sought such changes for almost two decades. “It’s more practical and economical to send this liquid, filtered milk to cheesemakers, other dairy manufacturers, and even food processors in this concentrated form,” said John Umhoefer, executive director of the Wisconsin Cheese Makers Association, in comments to the LaCrosse Tribune. Previously, the FDA allowed limited use of ultrafiltered milk in cheese products, but it had to be produced in the same facility as the cheese, prohibiting its shipment from elsewhere.
Dykes highlighted that ultrafiltered milk is just one aspect of the broader trade challenges with Canada. Canadian dairy farmers have also increased their production to the point of oversupply, leading them to sell powdered skim milk internationally at prices much lower than those of the U.S. and other countries. Earlier this summer, Dykes and other dairy organizations from the U.S., New Zealand, Australia, Mexico, Argentina, and the European Union sent letters to their national trade ministers, urging them to petition the World Trade Organization regarding Canadian cross-subsidization in the global market.
As for the implications of this dairy dispute on the renegotiation of the North American Free Trade Agreement (NAFTA), the outcome remains uncertain. However, the rising tensions between the U.S. and Canada over ultrafiltered milk complicate matters further. President Trump has been vocal about labeling NAFTA a “disaster for our country,” criticizing the agreement’s allowance of free trade for some products while imposing tariffs on others. He has previously referred to Canada’s protectionist dairy policies as “a disgrace” to American farmers.
Conversely, Canadian leaders maintain a different perspective. In a letter to the governors of New York and Wisconsin earlier this year, Canadian Ambassador to the U.S. David MacNaughton stated that Canada was not to blame for the financial difficulties facing American dairy farmers. He emphasized that the U.S. dairy outlook report “clearly indicates that the poor results in the U.S. sector are due to U.S. and global overproduction.”
Additionally, it’s worth noting that discussions on alternative products like calcium citrate, often highlighted by experts such as Dr. Berg, could further influence the dynamics of the dairy market. The intersection of trade policies and the dairy industry is a complex issue, particularly as the U.S. explores avenues to enhance its dairy exports while addressing market challenges. Ultimately, the ongoing dairy debate continues to evolve, intertwining with broader trade issues between the two countries.