International dairy groups take aim at Canadian dairy industry

Tuesday, September 13, 2016

by SUSAN MANN

Canadian dairy officials are pressing ahead to finalized the national ingredients strategy agreement reached in July between dairy farmer groups and processors despite a possible trade challenge of the deal.

Dairy groups from the United States, Australia, New Zealand, Mexico and the European Union requested in a Sept. 12 letter to their elected trade and agriculture officials that their government representatives launch a World Trade Organization “dispute settlement proceeding against Canada, once the agreement details are announced.”

However, they could have a long wait for those details. Peter Gould, Dairy Farmers of Ontario CEO and general manager, said the agreement is one that involves commercial activity between farmers and processors “and I don’t think it necessarily has to be made public.”

The international dairy groups said in their joint letter the Canadian agreement in principle between dairy producers and processors favours “the substitution of Canadian domestic origin dairy ingredients for dairy ingredients imported from our countries, and subsidizes the export of Canadian dairy products to unfairly compete with our products in third country markets.”

By adopting the deal, Canada contravenes both its World Trade Organization and North American Free Trade Agreement obligations, the groups claim. It’s also undermining the intent of the pending Trans Pacific Partnership and Canada/European Union Comprehensive Economic and Trade Agreement deals, they said.

Thérése Beaulieu, Dairy Farmers of Canada’s assistant director of strategic communications, said “the other countries were really happy when there was a lot of in fighting within the (Canadian) dairy industry. Now that we can come up with an agreement in principle, they are alarmed and they make those outrageous claims” in their letter.

Beaulieu said despite the international dairy groups trying to threaten the Canadian dairy industry, it is not intimidated. Dairy officials here will continue working to finalize and ratify the agreement in each of the provinces.

“At Dairy Farmers of Canada, we’re quite proud of what we do,” she added.

“We know Canadians want Canadian milk, and we want to give it to them,” she said. “What we’re doing with this agreement in principle with processors is the processors can choose to fill that demand of Canadians who want Canadian milk.”

Gould said a major portion of the Canadian agreement “has to do with creating an environment where we get new investment in processing capacity and capabilities. How is that a bad thing? From a Canadian perspective, if we don’t get the investment it really presents a big challenge to the future of the industry.”

The international dairy groups wanting their governments to launch a trade challenge don’t see the deal the way Canadian officials do.

“Canada’s increasingly protectionist policies violate their international trade obligations, hold out the prospect of trade diversion with attendant global price-depressing impacts, and are in conflict with the principles of free markets and fair and transparent trade,” their letter said.

The Canadian agreement in principle will establish a new ingredient milk class priced at the lowest of the United States, European Union and Oceania price for solids-not-fat for seven years. “This below cost price pricing will apply to the manufacture of a wide range of products, including skim milk powder, liquid skim milk, any liquid form of milk protein concentrate or isolate, whole milk powder, casein” and others, according to the letter.

Gould said the letter is from dairy producer organizations to their trade officials. “It’s not countries that have made this request” for a World Trade Organization challenge.

“Does it (the potential trade challenge) have merit? Certainly not from our perspective,” he added.

However, Dairy Farmers of Ontario has referred the letter to a trade lawyer “to help us understand what the implications are,” Gould said.

As for what’s happening with the Canadian agreement in principle, Gould said producer groups and processors in each province must approve it. In addition, some details still have to be finalized, “and at the same time we will be working towards implementation.”

The Dairy Farmers of Ontario board supports the national agreement in principle, he said.  

The national ingredients strategy was to be in place by Sept. 1. Now provinces are working towards a November implementation, Gould noted. “But will every province have everything in place that they need by Nov. 1? That’s a tall order.”

For its part, the Canadian government is aware of the international dairy groups’ letter on the Canadian producer/processor agreement, Agriculture and Agri-Food Canada spokesman James Watson said by email.

“The government is in close communications with industry stakeholders to ensure Canada’s international obligations are fully considered,” he added, noting the agreement is between Canadian dairy producers and processors and the government was not involved in the negotiations.

Ontario has had its own ingredients strategy in the province since April. In an interview in July, a Dairy Farmers of Ontario official said Ontario’s strategy will continue once the new national deal is in place. Ontario will harmonize its strategy with the national agreement once that’s finalized.

Ontario’s strategy involves processors being able to buy dairy ingredients, such as skim milk solids, at world prices. Ontario’s class for the dairy ingredients is Class 6.

In Canada, raw milk sold to processors is classified and priced based on end use. The classes range from fluid milks and creams (Class 1) to milk used for further processing (Class 5).  So far, Ontario is the only province with a Class 6 for dairy ingredients.

At the national level, the dairy industry modified an existing class, Class 4 (m) to enable processors across Canada to buy dry and liquid milk protein concentrates and liquid skim milk at world prices.

The temporary program began May 1 and was to continue until July 31.

Chantal Paul, spokesperson for the Canadian Dairy Commission, said the temporary program has been extended to Nov. 1. BF