Things are getting dairy sticky: after a recent Canadian proposal to change the import structure of U.S. dairy products, U.S. industry groups are unhappy.
Here’s what you need to know:
- Global Affairs Canada issued a proposal for changes to dairy tariff rate quotas (TRQ) under the U.S.-Mexico-Canada Agreement (USMCA).
- TRQs allow a certain amount of imports to be sold at a tariff rate of zero, or close to it. Additional imports beyond that threshold often get squeezed with sky-high tariffs.
- The U.S. Dairy Export Council (USDEC) and the National Milk Producers Federation (NMPF) rejected the proposal.
Why did the U.S. reject the changes? USDEC and NMPF do not want majority control of quotas for U.S. value-added dairy products (cheese, milk powder, ice cream, etc.) to belong to the largest Canadian dairy processors.
But as it stands now, Canadian processors maintain significant control over importing licenses.
Where’s the cheese (quota): A BIG change in the Canadian proposal is moving 100% of the cheese quota allocation to both processors and distributors based on market share. Currently, processors get 85% of quotas, and distributors get 15%. This means the largest Canadian processors would be in control by virtue of their market share.
Other market participants, such as Canadian retailers, are not included despite the large volume of U.S. dairy products they sell. The 100% change applies to quotas of milk powders, ice cream, whey powder, and yogurt.
Soundbite: “U.S. dairy farmers and manufacturers have only limited access to the Canadian market under USMCA. That makes it essential that Canada abide by its original commitments under that agreement. Canada’s recent dairy TRQ proposal will not lead to that result. While it’s not surprising that Canada is trying to see just how little will be demanded of them, it’s essential that the U.S. government insists on real reforms.” said Krysta Harden, president and CEO of USDEC.