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Trump often opposes Canada’s high dairy tariffs. He will become even more angry.
That’s because last week, the Canadian Senate passed new legislation, namely, enacted year, which prohibits the government from negotiating its dairy protectionism in future trade agreements.
The timing of the bill is by no means accidental. Canada hopes to get a sum from Trump’s tariffs and hopes to renew the U.S.-Mexico deal next summer. Trump will ask for a lot of exchanges from Ottawa. Canada’s concessions to tariff rate quotas on dairy products will be at or near the top of the list.
Canada’s new bill takes these tariff quotas from the desktop. This is misleading. Not only because it will thwart the U.S. and other trading partners, but also because supply management is not in Canada’s national interest.
Many inks have been overflowing, trying to understand supply management. The system dates back to the 1970s, setting provincial quotas, determining minimum prices and imposing huge tariffs.
Supporters believe it can stabilize prices and farm income. Critics say this has led to higher prices for Canadians, stifling innovation in the agricultural industry and causing serious trade tensions long before Trump.
Both sides agree on something: Supply management is the third railway in Canadian politics.
That’s because the system’s quota is mainly for dairy farmers in Quebec and Ontario. Because these provinces are crucial to winning federal elections, Canadian parties are reluctant to touch on supply management.
But Trump’s tariffs have provided Canadian elected officials with the political cover needed to change supply management. Under the cloud of unprecedented uncertainty in trade policy, big issues about the future of the country’s economy are imminent. This is the moment to build a nation. This is a serious period.
Instead of escalating, the House of Commons unanimously approved its Trade Protectionism Dairy Bill.
What’s next? Writing on the wall. Trump has been opposing Canada’s dairy tariffs for many years. He vowed that USMCA could fix the problem, but it provided Canada with 14 tariff quotas for products ranging from milk to cheese to cheese and butter.
For example, Canada’s tariff rate quota provides us with dairy farmers, which can accommodate up to 50 million tons, for example, but then put them in punitive tariffs, not just the matter. The prices Trump likes to talk about range from 241% on milk to 298% on butter.
However, American dairy farmers don’t actually pay these high rates because they never exceed the quota. This invites the most important question: Why?
The Biden administration believes that Canada’s quota favors domestic “processors” of dairy products, as well as so-called “further processors” that use dairy products as inputs to use other products. This will allow high-value U.S. exports to phase out hundreds of millions of dollars from the Canadian market.
In 2021, the United States filed a case against Canadian tariff rate quota and won the victory. However, in the second case, Canada is considered to be in line with its obligations. The ruling frustrated the Biden administration. Now, Trump wants to use tariffs to get things right.
The United States is not alone in complaining about Canada’s dairy tariff quota. Just last year, New Zealand filed a similar case against Ottawa under the integrated and progressive Trans-Pacific Partnership. The United States and New Zealand also sued Canada for tariff quotas from the World Trade Organization.
In view of this, it is not surprising that domestic opposition to the bill is.
The Canadian Cattle Association calls it a “bad trade policy.” “This is a flawed legislation that has caused disturbing precedents to undermine Canada’s long-term commitment to a rule-based international trading system,” said the Canadian Agricultural Food Trade Alliance.
Despite the ancient political obstacles, Trump’s tariffs have inspired Canada to take bold measures to eliminate intra-provincial trade barriers. Out of supply management in the country should be given priority and with the same urgency and commitment to solving creative problems.
Canada’s new dairy protectionism bill is not.
Marc L.