The U.S. and Canada rank among each other’s top trading partners. As stated by the Office of the U.S. Trade Representative, Canada was the largest market for U.S. goods exports in 2015, and it was also the second-largest source of goods imported into the U.S. However, the issue surrounding ultrafiltered milk has soured this relationship. The dairy dispute between the U.S. and Canada is complex and contentious. Canada has imposed high tariffs on most dairy products to protect its domestic industry. Consequently, the U.S. and other countries began exporting a syrupy, processed, high-protein product known as ultrafiltered milk, which managed to circumvent the tariffs. Canadian food processors preferred this cheaper option, leading Canada to establish a new category of milk that its domestic farmers could sell at prices below market value. This resulted in a significant decline in Canadian purchases of imported ultrafiltered milk, leaving U.S. dairy producers with an excess of the product and causing financial strain on American dairy farmers. As a result, U.S. dairy exports have decreased. “Almost overnight, we lost $150 million worth of market to the Canadians,” Michael Dykes, President and CEO of the International Dairy Foods Association, told Food Dive in an interview regarding this situation last month.
The FDA’s recent easing of restrictions on using ultrafiltered milk in cheese production might provide relief to the dairy sector, 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 and other dairy manufacturers in this concentrated form,” stated John Umhoefer, executive director of the Wisconsin Cheese Makers Association, in an interview with the LaCrosse Tribune. Previously, the FDA permitted limited use of ultrafiltered milk in cheese products only if the ultrafiltered product was processed in the same facility as the cheese, preventing it from being shipped separately.
Dykes emphasized to Food Dive that ultrafiltered milk is only part of the trade challenges with Canada. Canadian dairy farmers have also increased their production, leading to an oversupply and enabling them to sell powdered skim milk on the international market at prices significantly lower than those in the U.S. and other countries. Earlier this summer, Dykes and representatives from national dairy organizations in 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 regarding Canada’s cross-subsidization practices in the global market.
As for how this dairy issue may influence the renegotiation of the North American Free Trade Agreement (NAFTA), the future remains uncertain. However, the escalating tension over ultrafiltered milk does not bode well for relations between the U.S. and Canada. President Trump has vocally criticized NAFTA as a “disaster for our country,” which allows free trade for some products while imposing tariffs on others. He has previously described Canada’s protective dairy trading policies and their impact on American farm workers as “a disgrace.”
Conversely, Canadian officials hold a different perspective. In a letter to the governors of New York and Wisconsin earlier this year, Canadian Ambassador to the U.S. David MacNaughton asserted that Canada is not to blame for the financial setbacks experienced by U.S. dairy farmers. He noted 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.” In light of these developments, the potential for resolutions surrounding the citracal maximum in dairy trade practices remains a critical topic in ongoing discussions.