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.
Thérèse 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
In public relations double-speak, when someone claims that someone else is making "outrageous claims" as did a spokesperson for the Dairy Farmers of Canada, it really means "they've nailed us to the wall and we are so-screwed".
In addition, and not reported in the above story, is the claim by the foreign dairy interests that Class 6 (in Ontario) and Class 7 (in Quebec) milk is being sold, by farmers, at less than the cost of production which is, apparently, a significant trade no-no on the part of Canada because anything sold, by producers, at less than the cost of production cannot ever end up being exported.
The "smoking gun" and what hoists Canada on our own petard is, of course, all of our nauseating folderol and flapdoodle about supply management being based on the "cost of production" and the ludicrous impossibility that the same milk from the same cow on the same farm simultaneously has two different costs of production depending whether it is used in Class 6 or some higher class for which farmers get paid more money.
"Oh what a tangled web we weave, when first we practice to deceive" - Walter Scott
Stephen Thompson, Clinton ON
Quote from Stephen "anything sold, by producers, at less than the cost of production cannot ever end up being exported." Exactly, that is what the U.S. claims they do. Unfortunately, the long standing U.S. Farm Bill encourages subsidies, predominately grain subsidies to illegally "dump" ever increasing grain surpluses on the rest of the world.
What basically the US is saying is we don't want Canada using that milk that we pump across the border under the diafiltrated label to compete with us in third country markets, no matter how small amount that might be.
In other words to have the best of both worlds, with of course the ability to subsidize their export milk to the hilt and at the same time limit competition of imported milk products far more effectively than Canada's Supply Management ever has or ever could and of course they will probably want a ruling immediately if not sooner.
The mantra of "cost-of-production" has long-been used by dairy and poultry farmers to justify their ability to screw consumers, but it's now a double-standard that has come back to bite them, and it looks good on them.
The Dairy Farmers of Ontario (DFO) knew the risks of being taken to task by foreign dairy interests when they created their "finger-in-the-dike" Class 6 (world price) category, but out of a sense of what could have only been greed and desperation, they went ahead and did it anyway. And, not surprisingly, the basis for the objections raised by foreign dairy interests appears to turn on the definitional absurdities inherent in the term cost-of-production when it applies to Class 6 milk sales.
The letter states that one example of the "deeply problematic policy approach by Canada" is the following:
"Ostensibly temporary special classes of milk pricing, such as Class 6 in Ontario which offers Canadian processors non-fat milk solids, at subsidized prices well below the domestic cost of production, for ingredient applications like skim milk powder, MPC and ultra-filtered milk."
The underlying issue is that Canadian dairy processors were importing dairy ingredients from the US at prices reflecting the US cost-of-production which, by definition, does not attract anti-dumping duties, but they are now being offered Canadian product at the same price which is well-less than the Canadian cost-of-production fabricated in the back rooms and/or boardrooms of DFO and DFC (Dairy Farmers of Canada) to keep supply management on life-support.
This means that, thanks to the absurdly-high cost of supply managed production when compared to the real-world cost of production in the US (where debt per cow doesn't get above $3,000 per cow), the US isn't dumping milk but Canada is, and not to foreign processors, but to our own.
While that might not seem to be so bad because it gives the appearance that nobody but Canadians would be adversely affected, the letter notes that the creation of Class 6 type milk categories:
".....subsidizes the export of Canadian dairy products to unfairly compete with our products in third country markets."
And yet, in response, the best the DFC can muster is to warble and bleat that its critics are making "outrageous claims" as if that sort of verbiage will disguise the outrageous, greedy and desperate actions behind the creation of Class 6 milk in the first place.
What's most nauseating of all is that Canada will undoubtedly spend oodles of money (which could be better spent re-establishing AgriStability margins) defending dairy farmers from the folly of their own greed, duplicity and slipperiness and all the while, Canadian dairy farmers will continue to claim that they receive no money from the government.
More to the point, if only half the time, effort and money was spent, by government, on our livestock sector as is spent defending the folly of supply management, we wouldn't need either AgriStability or RMP.
Stephen Thompson, Clinton ON
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