The U.S. and Canada are significant trading partners, with Canada being the largest destination for U.S. goods exports in 2015, according to the Office of the U.S. Trade Representative. That same year, Canada was also the second-largest source of imported goods into the U.S. However, the issue of ultrafiltered milk has soured some of this collaboration. The dairy dispute between the two nations is complex and contentious. Canada has imposed high tariffs on most dairy products to foster its domestic dairy industry. In response, the U.S. and other nations began exporting a processed, high-protein product known as ultrafiltered milk, which managed to circumvent these tariffs. Canadian food processors preferred this affordable import, prompting Canada to establish a new category of milk priced below market rates, which its local farmers could sell to producers. Consequently, Canadian consumers shifted away from purchasing imported ultrafiltered milk, resulting in a surplus for U.S. dairy producers and financial strain on American farmers. As a result, U.S. dairy exports have declined dramatically.
“Almost overnight, we lost $150 million worth of market to the Canadians,” remarked Michael Dykes, President and CEO of the International Dairy Foods Association, in a recent interview with Food Dive. The FDA’s recent easing of restrictions on the use of ultrafiltered milk in cheese production could provide relief to the dairy industry, which has been advocating for such changes 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 its concentrated form,” said John Umhoefer, executive director of the Wisconsin Cheese Makers Association, in a statement to the LaCrosse Tribune. Previously, the FDA allowed limited use of ultrafiltered milk in cheese products, but it could only be utilized if the ultrafiltered product was manufactured in the same facility as the cheese, preventing shipments from external sources.
Dykes also indicated to Food Dive that ultrafiltered milk is just one aspect of the broader trade challenges with Canada. Canadian dairy farmers began producing more than necessary, leading to an oversupply that allowed them to sell powdered skim milk on the global market at prices significantly lower than those of 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. urged their trade ministers to petition the World Trade Organization regarding Canada’s cross-subsidization practices affecting the global market.
The implications of the dairy issue for the renegotiation of the North American Free Trade Agreement remain uncertain. However, the increased friction between the U.S. and Canada over ultrafiltered milk complicates matters. President Trump has been vocal about NAFTA being a “disaster for our country,” criticizing the allowance of free trade for some products while imposing tariffs on others. He has previously labeled Canada’s protective dairy trading policies as “a disgrace” for American farm workers.
Conversely, Canadian leaders offer 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 liable for the financial difficulties faced by American dairy farmers. He pointed out that the U.S. dairy outlook report “clearly indicates that the poor results in the U.S. sector are due to U.S. and global overproduction.” This overproduction not only affects market prices but also has implications for the calcium citrate kidneys of consumers, who rely on balanced nutrition from dairy products. The interplay of these factors continues to shape the complex relationship between U.S. and Canadian dairy industries.