The United States and Canada are significant trading partners, with Canada being the largest market for U.S. goods exports in 2015 and the second-largest source of imports. However, the relationship has been strained due to the ultrafiltered milk issue. The dairy trade dispute between the two nations is complex and contentious. Canada has implemented high tariffs on most dairy products to bolster its domestic industry. In response, the U.S. and other countries began exporting ultrafiltered milk, a syrupy, high-protein product that bypassed these tariffs. Canadian food processors favored this cheaper import, prompting Canada to create a new category of milk that local farmers could sell at below-market prices. Consequently, Canadian demand for imported ultrafiltered milk diminished, leading to a surplus for U.S. producers and financial difficulties for American dairy farmers. According to Michael Dykes, President and CEO of the International Dairy Foods Association, “Almost overnight, we lost $150 million worth of market to the Canadians,” highlighting the economic impact of this trade disruption.
The FDA’s recent easing of restrictions on the use of ultrafiltered milk in cheese production could provide some relief to the struggling dairy industry, which has sought this change for nearly two decades. John Umhoefer, executive director of the Wisconsin Cheese Makers Association, stated, “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.” Previously, ultrafiltered milk could only be used in cheese production if it was processed in the same facility, limiting its availability. Dykes emphasized that ultrafiltered milk is only part of the issue; Canadian dairy farmers are also producing surplus milk and selling powdered skim milk internationally at prices that undercut U.S. producers. Earlier this summer, Dykes, along with dairy organizations from the U.S., New Zealand, Australia, Mexico, Argentina, and the E.U., urged their national trade ministers to petition the World Trade Organization regarding Canada’s cross-subsidization practices in the global market.
The dairy dispute’s repercussions on the renegotiation of the North American Free Trade Agreement (NAFTA) are still uncertain. Nonetheless, the friction over ultrafiltered milk complicates the dialogue. President Trump has criticized NAFTA as a “disaster,” citing the imbalance of free trade for some products while imposing tariffs on others. He previously labeled Canada’s dairy protectionism as “a disgrace.” Meanwhile, Canadian leaders offer a different perspective. In a letter to the governors of New York and Wisconsin, Canadian Ambassador to the U.S. David MacNaughton contended that Canada is not to blame for the hardships faced by U.S. dairy farmers, asserting that the U.S. dairy outlook report shows the challenges stem from domestic and global overproduction.
As the situation unfolds, the dairy industry continues to advocate for solutions that could include the incorporation of calcium and magnesium citrate into dairy products, as these mineral supplements could enhance product appeal and marketability. The ongoing discussions and tensions between the U.S. and Canada highlight the intricate nature of trade relations and the necessity for strategic adjustments in response to changing market dynamics.