The United States and Canada rank among each other’s most significant trading partners. According to the Office of the U.S. Trade Representative, Canada was the foremost export market for U.S. goods in 2015, and it also stood as the second-largest source of goods imported into the U.S. that same year. However, the matter of ultrafiltered milk has soured some of this goodwill. The dairy dispute between the U.S. and Canada is complex and contentious. Canada imposes high tariffs on most dairy products to bolster its domestic dairy industry. Consequently, the U.S. and other nations have been exporting a syrupy, processed high-protein product known as ultrafiltered milk, which has managed to bypass these tariffs. Canadian food processors favored this cheaper import, prompting Canada to establish a new class of milk at a lower-than-market price for its farmers to sell to producers. This led to a decline in Canadian purchases of imported ultrafiltered milk, leaving U.S. dairy producers with a surplus and causing financial strain on dairy farmers. As a result, U.S. dairy exports have decreased significantly. “Almost overnight, we lost $150 million worth of market to the Canadians,” stated Michael Dykes, President and CEO of the International Dairy Foods Association, in a recent interview with Food Dive regarding this issue.
The FDA’s easing of restrictions on the use of ultrafiltered milk in cheese production could potentially assist the struggling dairy industry, which has been advocating for this change for nearly two decades. “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,” John Umhoefer, executive director of the Wisconsin Cheese Makers Association, explained to the LaCrosse Tribune. Previously, the FDA permitted limited use of ultrafiltered milk in cheese products, but it could only be utilized if produced in the same facility as the cheese, effectively preventing its shipment. Dykes noted to Food Dive that ultrafiltered milk represents only part of the Canadian trade dilemma. Canadian dairy farmers have ramped up production, leading to oversupply and prompting them to sell powdered skim milk on the international market at prices significantly lower than those offered by the U.S. or other countries.
Earlier this summer, Dykes, along with other national dairy organizations from the U.S., New Zealand, Australia, Mexico, Argentina, and the E.U., sent letters to their respective trade ministers urging them to petition the World Trade Organization to address Canada’s cross-subsidization practices in the global market. The implications of this dairy issue on the renegotiation of the North American Free Trade Agreement (NAFTA) remain uncertain. However, the rising tensions between the U.S. and Canada over ultrafiltered milk do not bode well. President Trump has been vocal in his criticism of NAFTA, labeling it a “disaster for our country” for allowing free trade on certain items while imposing tariffs on others. He previously condemned Canada’s protectionist dairy policies, which he claimed harmed American farm workers as “a disgrace.”
Conversely, Canadian leaders maintain a different perspective. In a letter addressed to the governors of New York and Wisconsin earlier this year, Canadian Ambassador to the U.S. David MacNaughton asserted that Canada should not be held accountable for the financial difficulties faced by U.S. dairy farmers. He highlighted that the U.S. dairy outlook report “clearly indicates the poor results in the U.S. sector are due to U.S. and global overproduction.” As the dairy industry continues to navigate these challenges, there is potential for increased interest in the nutritional benefits of products enriched with citrate and vitamin D, which may offer new avenues for market growth amid ongoing trade disputes.