We are finally getting some facts about supply management for Canada's dairy industry.
United States Donald Trump caught the attention of Canadian news media when he attacked supply management for the dairy industry.
But the initial news media reaction from columnists for the National Post and the Globe and Mail was to agree with Trump.
The Globe also published Maxine Bernier's open letter to Trump, which you can read on this site.
Today Prime Minister Justin Trudeau answered Trump. And Canadian Press used its Baloney Meter platform to quote Michael von Massow, a knowledgeable agriculture economist at the University of Guelph.
There have been long-standing complaints from American dairy farmers about Canada's sky-high tariffs (around 300 per cent for many products) that make it difficult for their processors to sell to Canadians.
But those same American farmers are not willing to give up federal government subsidies, both for milk and for the corn and soybeans they feed their cattle. If they would, it would make sense for Canadians to reduce the tariffs.
At the same time, it would make sense for both countries to allow trade in milk for processing - provided there are no government policies that skew prices. Quebec and Ontario dairy farmers would be in a strong competitive position to provide milk and dairy products for big cities, such as New York, Boston, Detroit and Cleveland.
But if it comes to a trade-off between Canadian supply management and U.S. subsidies, it will probably be a political stand-off, just as it has been so far.
The other issue that has irked the Americans is their loss of a market they pioneered in making ida-filtered, or ultra-filtered, milk components. Because it's new, it's not covered by Canadian tariffs.
And so huge volumes began pouring into Canadian cheese-making plants because it was available and cheap.
Canadian dairy farmers decided to fight back for that new market and established a lower price for processors buying their milk to make it. The Americans lost their sales to Canadian competition.
There is nothing in the North American Free Trade Agreement that prevents this kind of competition.
But there might be a contravention of the World Trade Organization rules. Canada was ordered to stop exporting low-priced dairy products before because the World Trade Organization ruled that the high prices Canadian farmers get for tariff-protected milk enables them to "subsidize" the extra milk they produce for exports.
Subsidizing exports is against the trade rules.
Canadian farmers had to stop exporting milk and dairy products made with cheaper milk.
Whether the WTO would rule that Canadians would also have to stop cross-subsidizing domestic milk is an issue that has never come before the WTO. Nor is it likely to.
So, beneath all the political heat, the issue is pretty simple: can the two countries agree to mutually change policies that benefit their dairy farmers so there can be fair and open trade?
