Canada’S Dairy Policy Remains Sticking Point in NAFTA Negotiations

The U.S. and Canada continue to butt heads over a deal to include Canada in the rewrite of the North American Free Trade Agreement and Canada’s dairy policy continues to be the main sticking point, according to White House National Economic Council Director Larry Kudlow, who spelled out the problem on Friday to Fox Business.

“I think the United States would rather have a trade deal with Canada, but it has to be a good deal and the word that continues to block the deal is M-I-L-K,” Kudlow said.

Canadian Minister of Foreign Affairs Chrystia Freeland, speaking Sunday to Canada’s Global News, refused to confirm Kudlow’s statement, stressing that she and U.S. Trade Representative Robert Lighthizer agreed to not discuss details of the negotiations with the press.

Of Kudlow, she stressed that “he’s not at the negotiating table.”

The U.S. is no longer demanding that Canada completely dismantle its dairy supply management system that seeks to insulate the country’s farmers from international competition, but the Trump administration remains firm in its call for the country to axe its Class 7 pricing mechanism.

“The Class 7 has to go away,” USDA Secretary Sonny Perdue told reporters last week. “If you want a supply-management system for the dairy sector … we’re simply saying you need to manage the supply and not allow your producers to overproduce, which reduces the international price that our dairy people have to compete with …”

The U.S. dairy industry alleges that Canada is using Class 7 to both block imports of U.S. dairy products and subsidize its own exports, stealing global market share away from the U.S.

President Donald Trump and his cabinet have been promising for more than a year to force Canada to change its dairy policies and that continues to boost the optimism of U.S. dairy farmers. That, together with the fact that the U.S. and Mexico have already reached a deal on NAFTA, is putting the pressure on Canada, says Jim Mulhern, president and CEO of the National Milk Producers Federation.

“Top officials in the Trump Administration have repeated their insistence – in strong support of NMPF’s assertions over the past year – that any successful NAFTA outcome must create more trade opportunities for the U.S. dairy sector, and not allow Canada to continue engaging in flagrantly anti-competitive practices,” he said.