Trump’s latest trade war target is Canada’s protected dairy industry. But Canadians have no intention of abandoning it – because it works
Donald J. Trump (@realDonaldTrump)
Canada charges the U.S. a 270% tariff on Dairy Products! They didn’t tell you that, did they? Not fair to our farmers!
June 8, 2018
Whatever understanding Canada and the US may (or may not) have come to on their high-value trade in lumber or auto parts, they remain implacably opposed on the comparatively minor matter of milk.
Trump has attacked Canada’s protected dairy industry before, calling it a “disgrace” and blaming it for widespread hardship among US farmers. Although the entire trade in dairy products between the two countries is worth less than US$600m, ideological division has sharpened the ongoing dispute. His negotiators have demanded the dismantlement of Canada’s openly dirigiste system of supply management in agriculture – a complicated nexus of production quotas and import tariffs designed to ensure Canadian dairy, egg and poultry farmers receive fair prices for their products.
But the Canadians are no less determined to retain one of the last vestiges of their otherwise-abandoned collectivist traditions. Canadian cows are sacred, and the farmers who care for them enjoy outsized influence in national politics. Expert observers have said that Justin Trudeau’s government would abandon the treaty altogether before sacrificing supply management.
“It’s just too sensitive for the Canadians,” Kevin Carmichael, a senior fellow at the Centre for International Governance Innovation in Waterloo, recently told CNBC news.
Even so, the Trudeau government recently alarmed Canadian farmers by signalling a willingness to give on the issue in the face of insistent US demands. The dispute has acquired new urgency as the US dairy industry continues to suffer from a deep crisis of persistent overproduction, with farmers sinking into insolvency as farm-gate milk prices stick stubbornly below the cost of production. Last year, US farmers dumped almost 100m gallons of surplus milk. Recently, a surge in dairy-farmer suicides has caused national alarm, drawing attention to what the New York Times called “the widespread hopelessness afflicting the industry”.
“Canada, when it comes to dairy, acts like China when it comes to trade,” Schumer told hard-pressed farmers in upstate New York. “They’re unfair. They put up barriers. They treat us bad.”
Meanwhile, just across the St Lawrence river in what free-trading Americans like to call Soviet Canuckistan, the dairy industry is thriving like never before – and like none other in the developed world. Family farms milking an average of 80 cows each have prospered under a heavily regulated system that supports prices at sustainable levels by restricting domestic overproduction and keeping imports at bay. In 2016, Canadian farmers received an average price of C$0.79 a litre for milk, compared with C$0.49 on average for US farmers.
The result is that dairying remains a key economic support of traditional rural life throughout central Canada. As critics of the system like to point out, hoping to inspire resentment among consumers annoyed by the price of milk, Canadian dairy farmers enjoy incomes 60% above average in the country.
Supply management enjoys strong government support in no small part because the policy obviates the need to subsidize farmers directly in the manner of the US and the EU – the two greatest culprits behind the current world dairy glut.
“The system works so incredibly well,” said Bruce Muirhead, associate vice-president and professor of history at the University of Waterloo. “And the big thing about supply management is that it doesn’t cost the government a cent. Consumers pay the full cost of production.”
theguardian.com
