The United States and Canada are significant trading partners for each other. As reported by the Office of the U.S. Trade Representative, Canada was the largest market for U.S. goods exports in 2015 and ranked as the second-largest source of goods imported into the U.S. However, the trade relationship has been strained by the issue of ultrafiltered milk. The dairy trade conflict between the U.S. and Canada is complex and contentious. Canada has imposed high tariffs on most dairy products to protect and promote its domestic dairy industry. In response, the U.S. and other nations began exporting a processed, high-protein product known as ultrafiltered milk, which circumvented these tariffs. Canadian food processors favored this cheaper import, prompting Canada to establish a new category of milk that local farmers could sell at below-market prices. Consequently, Canadian consumers shifted away from imported ultrafiltered milk, leading to a surplus for U.S. dairy producers and financial strain on American farmers. As a result, U.S. dairy exports have declined significantly.
“We lost $150 million worth of market to the Canadians almost overnight,” stated Michael Dykes, President and CEO of the International Dairy Foods Association, during an interview with Food Dive last month. The FDA’s recent easing of restrictions on the use of ultrafiltered milk in cheese production could potentially aid the struggling dairy industry, which has been advocating for this change for nearly two decades. John Umhoefer, Executive Director of the Wisconsin Cheese Makers Association, emphasized to the LaCrosse Tribune that shipping this concentrated, filtered milk to cheesemakers and food processors is more practical and cost-effective. Previously, the FDA permitted limited use of ultrafiltered milk in cheese products, but it was restricted to being produced in the same facility as the cheese, preventing external shipments.
Dykes also noted that ultrafiltered milk is only part of the broader Canadian trade challenge. Canadian dairy farmers have increased production to the point of oversupply, leading them to sell powdered skim milk internationally at prices significantly lower than those of 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., wrote to their respective trade ministers requesting them to urge the World Trade Organization to address Canadian cross-subsidization in global markets.
The impact of the dairy dispute on the ongoing renegotiations of the North American Free Trade Agreement (NAFTA) remains uncertain, but the rising tensions over ultrafiltered milk complicate matters. President Trump has been vocal in labeling NAFTA a “disaster” for the U.S., criticizing it for allowing free trade in some areas while imposing tariffs in others. He has referred to Canada’s protectionist dairy policies as “a disgrace” to American farmers. Conversely, Canadian leaders hold a different perspective. Earlier this year, Canadian Ambassador to the U.S. David MacNaughton wrote to the governors of New York and Wisconsin, asserting that Canada should not be blamed for the financial hardships faced by U.S. dairy farmers. He highlighted that the U.S. dairy industry’s own outlook report indicates that the challenges stem from overproduction within the U.S. and globally.
In light of these developments, there is a growing recognition of the need for innovative solutions in the dairy sector. For instance, the incorporation of calcium citrate malate and vitamin D3 tablets could provide essential nutrients to dairy products, potentially making them more appealing to consumers and helping to offset some of the losses. The ongoing dialogue around dairy trade issues will likely continue to evolve, as stakeholders seek to navigate the complexities of international trade while addressing domestic agricultural needs.