President Donald Trump has rightly complained that Canada’s new trade policies are unfairly hurting U.S. dairy farmers.
WORK hard, produce a great product in a sustainable manner, and take care of your customers — this has been a basic tenet of American business success. It has long been the case for hardworking U.S. dairy farmers.
In Washington state, the dairy industry contributes more than $5 billion a year in combined total economic activity and is responsible for more than 18,000 jobs, as reported in 2013 by Washington State University. Our cooperative, the Northwest Dairy Association, has more than 480 farm member-owners. Darigold, its processing subsidiary based in Seattle, is the second largest private employer in the state. We export more than 40 percent of our milk to 20-plus countries around the world, out of the Seattle and Tacoma ports. Trade is important to us.
But with the stroke of a pen, new Canadian government pricing regulations implemented in February are poised to unfairly take away our markets. The current U.S. administration was correct to stand up against Canada for shutting down U.S. exports of ultrafiltered milk — used to make cheese and yogurt — from farms in the Midwest and Northeast. This sudden change in pricing threatened the livelihoods of U.S. dairy farms.
The new Canadian National Ingredients Pricing Strategy, which indirectly subsidizes exports, will further hurt U.S. dairy exports of milk proteins. Since farms across the U.S. depend on a healthy global export market, Canada’s strategy poses a threat to America’s dairy farmers, especially those in the Pacific Northwest, by unfairly underbidding world market prices.
What is behind all these actions? Butter and cream — they are not only delicious but essential and nutritious, so Canadian consumers are buying more. To meet this domestic-demand growth, Canada is encouraging more of its own milk production, therefore supplying more butterfat, while simultaneously creating a surplus of skim milk, as milk contains both products.
As Canada must rid itself of excess milk proteins, it is using a government-controlled system to keep domestic milk prices at almost double the world price and comparable U.S. price, and creating a new scheme to push surplus milk proteins onto world markets. Except for allowed small volumes, Canadian dairy markets are protected from imports by imposed tariffs as high as 200 or 300 percent.
While this supply-controlled quota system may fit the social and political priorities of Canadians, it breaks with the spirit of their World Trade Organization trade commitments. After all, does it make sense that a high-priced milk producer with a closed domestic market using a government-sanctioned export program should take market share from countries with a lower cost of production, like the U. S.? The answer is no.
It appears that Canadian consumers also may be inclined to agree, given that they cross the border to places like Bellingham to stock up on milk, cheese and butter at better prices.
These points are particularly clear to Pacific Northwest dairy producers, as they are the closest to Asian export markets and are proportionally larger exporters than the rest of the U.S.
The U.S. dairy industry is progressive in sustainable production standards and competitive in cost and quality. A free, open, rules-based trading system where agricultural economies make the products for which they have the greatest relative competitive advantage and conduct trade with everyone else creates the greatest good worldwide — for both consumers and farmers.
I strongly encourage our lawmakers in Washington, D.C., and throughout the Pacific Northwest to defend the U.S. dairy industry and rural economies by standing up to this new Canadian pricing strategy and demanding its correction.