Glacier FarmMedia – A senior American agricultural policy leader is cautioning Canadian farmers to expect a resurgence of the dairy dispute.
“Watch out on dairy. I think that’s real,” Ted McKinney, a former undersecretary at U.S. Department of Agriculture, former Indiana minister of agriculture and current chief executive officer of the National Association of State Departments of Agriculture, said at an event hosted by the Canadian Agri-Food Automation & Intelligence Network Feb. 12 in Ottawa.
He said American officials, politicians and agriculture groups thought there was a deal to allow more American dairy products into Canada, but that Canada has failed to provide that access.
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“How (the) dairy (deal) was implemented here has really not set well,” said McKinney, who was the subject of a question-and-answer session.
“We felt betrayed. We feel betrayed.”
Canada’s crop farmers worry that they could be dragged into any dispute that arises over dairy as U.S. negotiators look for ways to pressure Canada to deal, said Grain Growers of Canada executive director Kyle Larkin in an interview.
Canada may refuse to discuss supply management in any trade talks through legislation such as Bill C-282, which looks to limit Canada’s ability to make trade concessions impacting supply managed sectors. As of Feb. 22, that bill was in second reading in the Senate.
“We’re very concerned,” said Larkin. “If supply management is off the table completely … there’s a major concern that the other side of agriculture could be affected.”
The dairy deal arose as part of the renegotiation of the North American Free Trade Agreement during Donald Trump’s presidency, when McKinney was at the USDA. U.S. negotiators believed they had gained access to 3.5 per cent of Canada’s dairy market for U.S. products, but Canada’s import system was structured to allow only domestic dairy processors to request U.S. product.
Those processors don’t have much incentive to import U.S. product that could compete with that of Canadian farmers, the U.S. argued. The U.S. wanted direct access to the market.
The first of two dispute resolution panels levied on the issue had mixed results, with both Canada and the U.S. claiming vindication of their positions. But the decision did side with the U.S. in stating that reserving access for processors to tariff rate quotas (TRQs), through which U.S. products are given market access, contradicted trade obligations.
Canada argued that the breakdown of TRQ allocation was not negotiated under the U.S.-Mexico-Canada Agreement that replaced NAFTA.
In May 2022, Canada announced a new strategy for TRQ allocation. It would be based on historical market share to retailers and distributors on either side of the border. The U.S. said that still kept Canadian retailers and other consumer-facing users from requesting American materials.
A second dispute panel exonerated Canada of the claim that it had broken the trade agreement. However, one of the panelists criticized Canada’s continued restriction of imports to processors.
McKinney is a vocal supporter of international trade and is opposed to the populist politics and protectionism that are growing in many parts of the world. He fears trade will become a political target again in this U.S. election year.
“Right now, we’re not doing much on trade, but boy oh boy, that rhetoric’s going to rise,” said McKinney, whose organization represents all state agriculture ministries.
He said he hopes to a see dispute resolution that will provide American farmers with something closer to what they thought they were getting with the Trump trade deal.
“We’re hoping the system will show whether we were right or we were wrong. Maybe there was a misjudgment,” said McKinney.
He urged Canadians to take the issue seriously and resolve it so it doesn’t bring other areas of trade into jeopardy.
“We’re going to get through this, but I think we’ll have to work through it.”
Larkin said Canada’s grain farmers and industries have been warned by a number of senators and trade sources that the dairy issue is not dead, that the Americans have ill feelings about Canada’s policies and that the politics could soon heat up.
“We just need to be super aware of this,” said Larkin.
The recent breakdown in talks between the United Kingdom and Canada over restrictions on beef and cheese “is just a small taste” of what could happen if the U.S. gets aggressive with the dairy dispute.
McKinney said he knows Canada has disputes with the U.S. too, such as the “Product of the USA” labelling scheme that could create discrimination against Canadian beef in the U.S. He joked that Canada and the U.S. could horse-trade on issues.
“We’ll make sure to take care and still allow your livestock to come down if you’ll fix dairy. How about that?” he said to laughter from the audience.
McKinney was opposed to U.S. mandatory country-of-origin labelling, which he described as “very misguided,” and said most of his colleagues at the time shared that view.
The dairy dispute is different. Most American agriculture interests feel Canada has gone against the spirit of the agreement, he said, but he maintained there is room for positive negotiations.
“I think we have got to continue the dialogue, which is what we have done,” said McKinney.
The Dairy Farmers of Canada did not have a response to McKinney’s comments.
– Ed White is a reporter with The Western Producer.
