The Chinese investors who built a plant in Scarborough to make infant formula for the Chinese market are running into bureaucratic nightmares arising out of milk-industry supply management.
The company spokesman, Stephanie Song, won’t talk about those issues, but has confirmed that the plant is far behind schedule.
In fact, had it met deadlines announced earlier, it would have been in production last year. Instead Song now says it’s still under construction and won’t be in production until sometime late this year, if then.
“It’s a complex situation. We’re trying to solve all these things and move on,” Song told reporter and dairy farmer Ian Cumming.
Maybe they will move to New York State where Chobani Inc., which also had plans to build a huge plant in Ontario, is buying unlimited volumes of milk from willing dairy farmers.
The Dairy Farmers of Ontario marketing board issued the company a Special Class permit in September, 2011. That gave it permission to buy lower-cost milk, such as skim milk from Gay Lea Ltd. which would otherwise use it to make skim milk powders.
That paved the way for the company to sign infant formula contracts with four Chinese provinces - Zhejiang, Shanxi, Fujian and Sichuan.
The company enthusiastically told on its website how it's 150,000-squre-foot plant would export $100 million worth of infant formula a year, it announced a board of directors that included a former Ontario deputy minister of agriculture and showed the export contracts. That's all been removed from the website.
Last fall company spokesman Michel le Zhou said about the delays that “we are still under construction and will be producing in early 2014.”
Gay Lea says there have been lots of discussions, but so far no contract to supply the facility in Scarborough.
Cumming says he learned that Special Class permits, such as the one granted this business, are supposed to be for milk that displaces imports.
Apparently somebody complained to the World Trade Organization that this permit would be used to buy milk to make infant formula for export to China and the WTO wrote to Canada seeking clarification.
Canada lost a previous World Trade Organization challenge to export. The WTO ruled that supply management amounts to a subsidy for all milk and Canada is barred from exporting subsidized dairy products that is beyond limits set by quotas.
Canada has apparently not answered the letter from the WTO.
The issue has been raised in the midst of finalizing the trade deal with Europe and ongoing negotiations under the Trans-Pacific Partnership and after Canada was criticized for blocking imports of pizza kits.
“The Canadian government is leery of another dairy problem,” Cumming said he has been told by an industry insider.
“They (Canadian government officials) are really tired of getting attacked in the press over things such as subsidized pizza kits in Guelph. Plus they don’t believe in doing that sort of thing, ” Cumming said.
The publicity surrounding abuses of Canada’s Temporary Worker Program have presented another challenge because the Chinese company, Canadian Dairy Manufacturing, had its request to import staff from China turned down.
"The company, the government, and Canadian Dairy Commission know, without a doubt, the instant that any product is shipped to China, a WTO challenge will be launched," Cumming said in an e-mail.
There is speculation that the Chinese will move their plant to New York where there would be no supply-management or export issues.
If so, it will be the second major plant that had plans to use skim milk in Ontario, but failed to clear the bureaucratic maze. Chobani Inc. built instead in the United States.