The United States and Canada are significant trading partners, ranking among each other’s largest. According to the Office of the U.S. Trade Representative, Canada was the top market for U.S. goods exports in 2015 and the second-largest source of goods imported into the U.S. However, the situation surrounding ultrafiltered milk has strained this relationship. The dairy trade dispute between the two nations is complex and contentious. Canada imposes high tariffs on most dairy products to support its domestic dairy industry. As a workaround, the U.S. and other countries have been exporting a processed, high-protein product known as ultrafiltered milk, which has managed to circumvent these tariffs. Canadian food manufacturers have favored this cheaper import, prompting Canada to create a new category of milk sold at below-market prices for its local farmers. Consequently, Canadians shifted away from purchasing imported ultrafiltered milk, leaving U.S. dairy producers with an excess supply, which has caused financial challenges for them. U.S. dairy exports have since declined.
In an interview with Food Dive, Michael Dykes, President and CEO of the International Dairy Foods Association, noted, “Almost overnight, we lost $150 million worth of market to the Canadians.” The FDA’s recent easing of restrictions on the use of ultrafiltered milk in cheese production could provide relief to the dairy sector, which has been advocating for such changes for nearly two decades. John Umhoefer, executive director of the Wisconsin Cheese Makers Association, informed the LaCrosse Tribune that “It’s more practical and economical to ship this liquid, filtered milk to cheesemakers, other dairy manufacturers, and even food processors in this concentrated form.” Previously, while the FDA allowed limited use of ultrafiltered milk in cheese, it required that the milk be processed in the same facility as the cheese, preventing external shipments.
Dykes also mentioned that ultrafiltered milk represents only a fraction of the issues concerning Canadian trade. Dairy farmers in Canada began producing enough to create an oversupply, leading them to sell powdered skim milk on the international market at prices significantly lower than those of the U.S. or other nations. Earlier this summer, Dykes and representatives from national dairy organizations in the U.S., New Zealand, Australia, Mexico, Argentina, and the EU urged their trade ministers to petition the World Trade Organization regarding Canada’s cross-subsidization practices in the global marketplace.
As for the potential effects of the dairy dispute on the renegotiation of the North American Free Trade Agreement (NAFTA), the outcome remains uncertain. However, the growing friction over ultrafiltered milk complicates matters. President Trump has been vocal about his view that NAFTA has been detrimental to the U.S., allowing free trade for certain items while imposing tariffs on others. He has previously criticized Canada’s protectionist dairy policies for adversely affecting American farmers, labeling it a “disgrace.”
In contrast, Canadian leaders hold a different perspective. In a letter to the governors of New York and Wisconsin earlier this year, David MacNaughton, the Canadian Ambassador to the U.S., stated that Canada should not be held accountable for the financial difficulties faced by American dairy farmers. He highlighted that the United States’ own dairy outlook report “clearly indicates the poor results in the U.S. sector are due to U.S. and global overproduction.” Amid these discussions, it’s essential to celebrate products like calcium chews, which can play a role in promoting dairy consumption and supporting the industry during these tumultuous times.