Canadian farmers are protected by "supply management" while American dairy farmers are drowning in cheap milk.
When Donald Trump was asked how he could consider Canada a threat to American national security, he mentioned the burning of the White House in the War of 1812. Now he is venting about the Canadian dairy industry. So what is the problem here? Is he still relitigating the War of 1812? Is he complaining about Canadian hero Laura Secord, who used a cow to sneak by American troops and warn the British of an impending attack in 1813? And as happened in the War of 1812, is a common opponent uniting the country?
Indeed, American President Donald Trump did a remarkable thing this past Saturday: he united Canadians behind their Prime Minister to a degree that nobody has seen in decades, maybe never. Apparently, the President didn't like what Justin Trudeau said in a press conference after the recent G7 meeting, and considered this rather innocuous statement a "stab in the back" for which Trudeau deserves a "special place in hell." All the leaders of the opposition parties, everyone everywhere in the country, tweeted out support. Even the newly-elected populist Doug Ford, who has claimed to be a fan of Donald Trump's, is on this bandwagon.
We will stand shoulder to shoulder with the Prime Minister and the people of Canada. My number one goal is to protect jobs in Ontario, starting with my unwavering support for our steel and aluminum workers.— Doug Ford (@fordnation) June 10, 2018
One of the President's main gripes about Canada is its supply-managed dairy industry. He complained:
No tariffs, no barriers, that's the way it should be and no subsidies. In other words, let's say Canada, where we have tremendous tariffs. The U.S. pays tremendous tariffs on dairy, as an example, 270 percent ... we don't want to pay anything, why should we pay anything?... It's very unfair to our farmers. Our farmers, whether it's through a non-tariff trade barrier or whether it's through very high tariffs ... You can't do that. It's going to stop, or we'll stop trading."
Canada charges the U.S. a 270% tariff on Dairy Products! They didn’t tell you that, did they? Not fair to our farmers!— Donald J. Trump (@realDonaldTrump) June 8, 2018
Canadian writer John Barber explains the issue in detail in the Guardian:
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”.
Meanwhile, north of the border,
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 head of the dairy industry in Alberta is obviously going to defend his farmers and tells the Calgary Herald:
Knowing the dairy industry, we know that a very small oversupply is devastating to prices,” he said. “It gives a fair price to the farmers, we don’t overproduce where we have to dump milk and we have a fair price at the stores and a guaranteed supply. If Trudeau sacrificed something like this, it would be devastating to Canadian dairy farmers because we’ve built our whole systems knowing that we would get a fair price into the future. You set up your financing for that. It would be if your bank or something took your mortgage and changed it.
Canadian consumers complain that they are paying twice as much for milk as Americans do, but the system works for Canadian dairy farmers. In the States, farmers are subsidized by the government and are still losing money but in Canada, consumers pay a lot more but cover the cost of production. Barber quotes Professor Bruce Muirhead, who visited Wisconsin,“the president of the Wisconsin Farmers Union told me that what they really wanted was a supply-managed system like ours.”
TreeHuggers might care that American dairy farmers are allowed to use hormones and veterinary drugs that are illegal in Canada. For years, American cows were treated with Recombinant bovine growth hormone (rBGH) which improves milk yield by about 15 percent, and is illegal in Canada and the European Union. It is still legal in the USA but most farmers have given it up as major buyers are rejecting it- the market has decided that it doesn't want this in milk but the government hasn't followed.
But back to the President, is it all about the dairy industry? Not likely. As Professor Muirhead tells John Barber,
Canadian farmers point out that despite the tariffs that protect them, imports make up 10% of the country’s dairy consumption. By contrast, the US restricts dairy imports to 3% of domestic consumption. “That just screams hypocrisy to me,” Muirhead said. “I don’t understand how they can get away with these positions.”