Dairy remains hot topic in U.S. trade relations

Canada’s recent moves to create a new class of low-priced milk to persuade processors to stop importing tariff-free isolates from the U.S. have become one of the hottest buttons in trade relations.

Jaime Castaneda, senior vice-president for the U.S. Dairy Export Council, said his organization will pursue fresh challenges through the World Trade Organization unless Canada stops its new pricing.

“If we can’t resolve this through negotiations, I believe my members will be very clear that everything is on the table,” he said in a phone interview.

A WTO panel ruled in 2002 that Canada breached its trade obligations through illegal subsidies to its dairy industry, siding with the United States. The U.S. and Canada reached a settlement in 2003.

The WTO ruled that Canada was able to market dairy products at low world prices only because dairy farmers could cross-subsidize from the higher-priced milk they sell on the Canadian market.

The U.S. will probably make the same cross-subsidy argument in challenging the new pricing regime adopted by provincial marketing boards.

Some warned the marketing boards this would happen.

On the other hand, U.S. Agriculture Secretary Sonny Purdue said he’s willing to negotiate a settlement of the milk-pricing issue before broad negotiations for a revamping of the North American Free Trade Agreement begin.