Tuesday, April 18, 2017

Trump's plan to renegotiate NAFTA leading to dairy trade war

Dairy cows in Sheboygan, Wisc. (Post photo by Darren Hauck)
President Trump’s promise to renegotiate the North American Free Trade Agreement with Canada and Mexico is leading to a dairy war that is hurting U.S. farmers, Caitlin Dewey reports for The Washington Post. The dispute has already affected 75 family farms and caused more than $150 million in losses.

NAFTA "contains terms governing dozens of different dairy products alone," Dewey writes. "Reworking many of these, experts say, will involve not just complex technical discussions but a fight between powerful political interests on both sides of the border. And in almost every case, on the line will be the livelihoods of the people who grow or make the products, each with a compelling case for why their side should prevail."

"Trade agreements between the U.S. and Canada govern what kinds of tariffs the countries can impose on each other’s goods," Dewey writes. "While NAFTA eliminated many tariffs between the countries, some large tariffs on dairy remained. But ultrafiltered milk hit the market after NAFTA’s 1994 enactment. As a result, it could enter Canada without facing big tariffs. Ontario farmers, frustrated with the arrangement, last April dramatically cut the prices on Canadian ultrafiltered milk. Other provinces plan to follow suit, posing a dire threat to U.S. farms.

"American agricultural interests have decried Canada’s actions as deeply unfair," Dewey writes. "The Canadian dairy industry disputes these allegations, arguing that U.S. milk producers have built far too much capacity in recent years and face such an oversupply of milk that they have to cut back."

A bipartisan alliance of policymakers, "have called on the Canadian government to intervene in its dairy industry," Dewey notes. "Industry groups, meanwhile, have called on the Trump administration to intervene directly. On Thursday, several powerful dairy trade associations sent a joint letter to Trump, asking that he push Canadian Prime Minister Justin Trudeau on the issue and direct U.S. agencies to 'impress upon Canada in a concrete way the importance of dependable U.S. trade.' The letter called on Trump to escalate the issue to the World Trade Organization if Canada doesn’t respond positively." Trump so far hasn't responded.

"The industry is also concerned the dispute could spill into other products," Dewey writes. "The Ontario price drop applied not only to ultrafiltered milk but also to skim milk powder, which could eventually result in Canadians selling more of the ingredient on global markets. That could depress prices for American farmers, and ultimately hurt them even more than the lost trade in ultrafiltered milk. Without renewed access to the Canadian market, U.S. dairy farmers find themselves in a deeply precarious situation. They are scrambling to find new processors to buy their milk, but finding few takers because of the overall glut."

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