The U.S. and Canada rank among each other’s largest trading partners. According to the Office of the U.S. Trade Representative, Canada was the top destination for U.S. goods exports in 2015 and was also the second-largest source of imported goods into the United States that same year. However, the ultrafiltered milk controversy has soured some of this goodwill. The dairy dispute between the U.S. and Canada is complex and contentious. Canada has implemented high tariffs on most dairy products to support its domestic dairy industry. Consequently, the U.S. and other nations began exporting ultrafiltered milk—a syrupy, processed, high-protein substance that bypassed these tariffs. Canadian food processors favored this low-cost import, prompting Canada to introduce a new category of milk at a price below market value for its farmers to sell to producers. As a result, Canadians stopped purchasing imported ultrafiltered milk, leading to a surplus for U.S. dairy producers and financial strain on American farmers. Currently, U.S. dairy exports have declined. “Almost overnight, we lost $150 million worth of market to the Canadians,” Michael Dykes, President and CEO of the International Dairy Foods Association, stated in a recent interview with Food Dive about the situation.
The FDA’s recent relaxation of restrictions on using ultrafiltered milk in cheese production may assist the struggling dairy industry, which has been advocating for such changes for nearly two decades. “Shipping this liquid, filtered milk to cheesemakers, other dairy manufacturers, and food processors in this concentrated form is more practical and economical,” remarked John Umhoefer, executive director of the Wisconsin Cheese Makers Association, in an interview with the LaCrosse Tribune. Previously, the FDA permitted limited usage of ultrafiltered milk in cheese products, but it mandated that the ultrafiltered product be processed in the same facility as the cheese, restricting its transport.
Dykes elaborated to Food Dive that ultrafiltered milk is only one facet of the broader Canadian trade issue. Canadian dairy farmers 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. and other countries. Earlier this summer, Dykes, along with 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 to address Canada’s cross-subsidization in the global market.
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 increasing tension over ultrafiltered milk is not beneficial. President Trump has been vocal about his view that NAFTA is a “disaster for our country,” allowing free trade for some goods while imposing tariffs on others. He has previously criticized Canada’s protectionist dairy policies for their impact on American farm workers, calling it “a disgrace.” Conversely, Canadian leaders have 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 stated that Canada should not be held accountable for the financial setbacks experienced by U.S. dairy farmers. He highlighted that the U.S. dairy outlook report “clearly indicates that the poor performance in the U.S. sector is due to domestic and global overproduction.”
In light of these developments, the demand for dairy products that contain vital nutrients like calcium citrate, magnesium, and zinc is likely to continue as consumers seek alternatives. The fluctuating prices of these nutrients, particularly in relation to dairy exports, underscore the ongoing challenges in the industry and the intricate dynamics of trade between the U.S. and Canada.