Leaders in the United States dairy industry claim that Canada is flouting the spirit of the trade deal among Mexico, the United States and Canada by continuing to subsidize dairy exports.
Canada agreed in the negotiations to scrap Class 7 milk pricing which was a price so low that processors could make money producing skim milk powder and protein isolates both to displace imports and to make export sales.
It was at about the same time that USMCA came into force a year ago that the Canadian Dairy Commission implemented Class 4a to set prices for dairy protein products, some of which are similar but not exactly the same as what was covered by the now-defunct Class 7.
“Canada’s actions have given cause for concern,”Allan Huttemam, chairman of directors for Northwest Dairy Association and Darigold, told the U.S. Senate Finance Committee last week.
“Canadian exports of milk protein isolates and certain skim milk blends manufactured under the new Class 4a have been increasing in a manner that seems designed to evade USMCA disciplines,” Huttemam testified.
He asked the U.S. government to take action on what he sees as a problem that will only continue to worsen, but industry representatives do not see an easy resolution.
The Office of the U.S. Trade Representative, Huttema said, needs “to keep a careful eye on milk protein isolate and skim milk powder exports out of Canada. We are concerned that they may be increasing production to circumvent milk protein export caps, undermining the spirit of USMCA.”
There was no mention made of a new World Trade Organization agreement that bans export subsidies. The WTO ruled several years ago that if Canada prices milk lower for making products that are exported, it’s a subsidy.