by SUSAN MANN
The Canadian government’s decision to grant two import permits to an U.S. Greek yogurt maker so it can bring product in from the United States for up to 15 months without having to pay prohibitive duties was reasonable, a Federal Court judge has ruled.
Judge Sandra J. Simpson handed down her decision and reasons June 21 after companies, Danone Inc., Ultima Foods Inc. and Agropur Cooperative, requested a judicial review of an earlier decision by the Minister of International Trade. The minister’s decision, handed down Oct. 17, 2011, granted Agro-Farma Canada Inc. two supplementary import permits to bring in and sell its Greek yogurt, called Chobani, in 65 stores in the Greater Toronto Area. The review took place in court in Montreal on April 24 and 25.
“The evidence is that production of Chobani in Canada will result in higher incomes for dairy farmers,” Simpson writes. Agriculture and Agri-Food Canada advised the international trade minister that Chobani production would increase Canadian milk consumption by 80 million litres by the fourth year of the project. The federal agriculture department also told the minister the Canadian yogurt market is growing by six per cent per year and would bear the introduction of Chobani with minimal effect on its competitors.
Quota increase in Ontario?
Bill Mitchell, Dairy Farmers of Ontario assistant communications director, says if the projection turned out to be true it would mean an increase in quotas for provincial dairy farmers of about one per cent by the fourth year the Chobani plant was up and running in Ontario. Dairy Farmers didn’t participate in the court case.
Current yogurt production in Canada is about 320 million litres annually, which is about four per cent of total milk use, Mitchell says.
Ontario’s total milk production was 2.5 billion litres in 2010-11.
Simpson says any revenue losses would be limited to the short-term, which is the 15 months under the permits.
One of the permits was for a three-month period from Nov. 7, 2011 to Feb. 6, 2012 so Agro-Farma could test its product in the Canadian market. The other was for one year, Feb. 7, 2012 to Feb. 6, 2013, to import and sell Chobani in the Greater Toronto Area on the condition the company would invest in production facilities in Ontario and create jobs. The bridging permit is valid for one year or until Agro-Farma’s Canadian plant is operational.
Deal details kept secret
Details on how many kilograms Agro-Farma was allowed to import under the permits, the monetary investment in its Ontario production facility and the number of new jobs to be created were omitted from the written ruling by agreement of those involved in the court case, according to Federal Court documents.
The permits enabled the company to avoid having to pay a duty of 237.5 per cent on its imports. As part of the World Trade Organization agreement, Canada’s import access commitment for yogurt is 332,000 kilograms. Imports greater than this figure are subject to the duty. “This prohibitive duty effectively blocks yogurt imports,” Simpson states.
Chobani officials couldn’t be reached for comment.
Danone’s external communication’s manager, Anne-Julie Maltais, says by email they’re disappointed in the judge’s decision. The company hasn’t yet decided if it will appeal the ruling.
“Danone believes the issue is one of fair competition within the existing Canadian supply management system,” she says. “If Danone is bound by the rules of supply management our competitors should also be bound by these same rules.”
U.S. dairy producer Chobani benefits from preferential treatment by the Canadian government for the sale of its Greek yogurt made entirely of American milk, she says.
Danone is the leading traditional yogurt producer in Canada and since 2010 has sold its Greek yogurt, Oikos, in Canada and Oikos Organic Greek yogurt, which is co-packed in Ontario by Gay Lea Food Co-operative Ltd.
Greek yogurt is a style of yogurt that has a thicker consistency, lower carbohydrate content and higher protein than traditional yogurt.
There are five dairy processors currently marketing Greek yogurt in Canada – Liberte, Parmalat, Danone, Olympic, and Skotidakis.
U.S. milk prices lower
In her ruling, Simpson writes that unlike Canada, the United States doesn’t have a supply management system based on the three pillars of production management, a pricing policy that covers production costs and import controls. Instead, the U.S. government pays direct subsidies to dairy farmers to support their incomes. As a result, milk prices in the U.S. are substantially lower than in Canada. “For example, the type of milk used in yogurt is 79 per cent more expensive in Quebec than in New York State,” she says.
Chobani for the Canadian market coming in under the supplementary import permit is made in New York State. Quebec processes 70 per cent of yogurt currently made in Canada.
Mitchell says prices processors pay for milk used for yogurt in Ontario are similar to prices paid in Quebec. Both provinces are part of an Eastern Canada milk pooling agreement. Under the agreement, the provinces share revenue from industrial and fluid milk markets and work cooperatively on other matters of mutual interest. Other provinces in the pooling agreement are: Prince Edward Island, Nova Scotia and New Brunswick.
Simpson says Dairy Farmers of Ontario and the Ontario Ministry of Agriculture, Food and Rural Affairs expressed support for the Agro-Farma proposal. Dairy Farmers also said Agro-Farma would have access to the milk it needed to manufacture Chobani in Ontario. The Canadian Dairy Commission supported the proposal but said the international trade minister shouldn’t issue the bridging permit until it confirmed Agro-Farma’s plans to invest in an Ontario manufacturing facility.
Permit undercuts domestic producers, says farmer
Ontario dairy farmer Gerrit Wensink, who farms near Woodstock, wasn’t part of the court proceedings. He says he’s puzzled “that the government gave this permit for such a long time because it’s really undercutting our domestic producers.”
Simpson states that normally permit applications are confidential. But Canadian dairy processing companies and other stakeholders somehow learned about the Chobani application and wrote the international trade minister in May and June 2011. “It is significant that these letters were before the minister when he made the decision.”
The minister approved the permits primarily because of the 80 million litre increase in milk demand four years after Agro-Farma’s plant was up and running and the prospect of a significant investment in the manufacturing sector, she writes.
Simpson says that the position of the processors who wrote the minister opposing the permits was that Greek yogurt isn’t a new product and granting permits to Agro-Farma would harm Canadian processors’ competitive position, employment at processing plants and investment in processing facilities. In addition, sales of Chobani would cannibalize Canadian processors’ sales of Greek and traditional yogurt and Chobani isn’t made using a unique process.
Government guidelines permit the international trade minister to issue supplementary import permits for products already being made in Canada if a unique production process is used or investment is planned in Canada. After a meeting last June with officials from the foreign affairs and federal agriculture departments where Agro-Farma officials explained the Chobani production process, government officials were satisfied the process met the requirement for a unique process.
No harm to supply management says Attorney General
For its part, Canada’s Attorney General argued protecting processors from competition isn’t a stated objective of supply management and the companies haven’t provided evidence of actual financial harm or loss of market, even though Chobani has been sold in the Greater Toronto Area since Nov. 7, 2011. There also isn’t any evidence supply management has been injured.
Simpson states she wasn’t persuaded by the companies’ submission that the minister can only grant permits that support supply management but acknowledged “that in the short term permits for dairy products manufactured with less expensive U.S. milk will cause some disruption to supply management.”
But she concluded the minister’s decision was reasonable because: the evidence before him was the Chobani permits would not harm supply management in the long term; the volumes were less than those granted to Danone when it received permits providing duty relief in 2006 to import its U.S.-produced DanActive beverage over a 20-month period; Chobani sales are restricted to the Greater Toronto Area; and the Chobani imports are only possible for 15 months. The quantity of DanActive that Danone was permitted to import was omitted from the written decision by agreement between the participants in the court case. BF
Comments
I have tried all the Canadian greek yogurts and none compare to Chobani .....keep up the good work and welcome to Canada.
Finally Canadian consumers will see some benefits from competition,even if the Quebecers dont like it.
Having Yogurt plant supply quota created after the processors knew this was happening is crooked.Whats next, pudding plant supply quota ,but wait there is none made in Canada.Maybe they should look at cottage cheese plant supply quota before another competitor comes along
This whole matter is completely-insane. Why should Canadian consumers, especialy poor ones, be forced to forever shoulder the burden of milk prices which were found to be 79% higher in Quebec than in New York State? Even more insane is that dairy farmers are worried that this import permit will "undercut" them in the short term, yet they are not concerned in the slightest that supply management, and its 237% tariff barriers, by definition, undercuts every other sector of agriculture in the long term. For the good of the farm community, and for the good of Canadian consumers, we can't get rid of the albatross of supply management soon enough.
Stephen Thompson, Clinton ON
I was down south not to long ago and talking to people about egg prices that they pay 1$ a dozen in Michigan and 1.50$ in the lower midwest. The dairy prices was similar to Canada. So what is this pick on dairy days?
For some reason, chicken and egg farmers seem to realize that they're on the receiving end of a regressive consumption tax levied disproportionately on poor consumers, and they also seem to realize they've pitted farmers against one another by being able to do so - therefore, they tend to keep their "laundry" private. Dairy farmers, on the other hand, seem to have so little regard for either consumers or other farmers that they just don't care who they offend as long as the money keeps rolling in.
Stephen Thompson, Clinton ON
There is hardly any egg producers out there and the ones that is there is huge.
The price of eggs in the stores is really sad and look at the price differents between Canada and the USA.
and the price of cars are sad in ontario. look at the price difference between ontario and usa for the exact same models.
look at the price difference of drugs and books.
Look at the price difference in farm chemicals . That there is a rip off . And then look at the fact of chemicals that can be used south of the border but not here .
Heard on the news today that shoppers in BC are crossing the border to shop for milk. The US residents are complaining about the Canadians. They have seen a whole shelf of milk empty out in no time, leaving them empty handed. Yea sure the prices are similar, that's why the Canadians are crossing the border right? Who do you think you're fooling?
You distorted the news. There is no mention of "milk" but organic foods are mentioned and the crowded parking lots of RVs.
http://www.torontosun.com/2012/08/13/americans-demand-canadian-free-shop...
I distorted nothing. My source was a talk show I was listening to while working in the barn. Your source is different than mine...which one is right? I have heard this from other sources too. A pallet of milk disapearing in no time. Sorry you don't agree with my sources.
Selling milk at a huge discount sure will get the shoppers into the store.
If the Costco was in Washington State, I'd be asking where the milk was produced. You know, free trade with Asia.
China developed genetically modified cows that produce milk which could substitute for human breast milk.
Yum, yum ;)
Not to mention gas is selling for $1.60 less a gallon.
I would go across just for the cheap gas.
A jug of milk at the Downtown Vancouver Costco is listed for $4.60, while the equivalent at the Bellingham Costco is $2.50. A 1,000-gram block of cheese is $13 in Vancouver but $4 cheaper in Bellingham. A 230-count case of Huggies diapers is $48.99 and about $10 cheaper south of the border.
The National ran a piece on this last night.
A pallet of 1 gallon jugs of milk was being attacked by a constant barrage of shoppers.
The containers were plasti-wrapped into groups of two.
They taped the trunk of a car and there were at least 8 or 10 jugs of milk along with 4 jerri cans of fuel - at least I assume it was fuel....
It was at a Costco in Washington state.
Prices are typically higher in Canada than in the United States. Little wonder - there is not a level playing field. Canadian businesses pay higher taxes, wages and land prices. We have more stringent quality standards, environmental standards and labour benefits. These all have benefits to society but they cost the business money. Canadian dairy farmers do not have subsidies from the government which U.S. dairy farmers have so Canadians pay only at the grocery store for their dairy products, not at the grocery store and through their taxes.
Newsflash. The taxpayer and the consumer are the same person. Whether money is taken from that person in the form of taxes or Government mandates, there is no difference. It comes from the same pocket.
Taxpayers and consumers are definitely NOT the same person, and there is a huge, and extremely-critical, difference between money government gives to producers raised from tax revenue, and money producers receive from the mandated usage of something. For example, corporations are not consumers, yet they are taxpayers, and quite significant taxpayers at that. In addition, consumption taxes, as manifested by tariff-based entities like supply management, are regressive (as well as always net-negative for jobs) because, as a percentage of their net incomes, poor consumers pay disproportionately the most, rich consumers pay disproportionately the least, and corporations pay nothing.
Stephen Thompson, Clinton ON
we are so lucky in Canada that we have regulations against hormones and antibiotics in our yogurt and dairy, unless organic, from the U.S. not only will you get cheap yogurt and milk you'll be ingesting hormones and the harmful effects to your help from eating food where antibiotics were routinely used.
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