[CTC] U.S. dairy calls for end to Canadian supply management

Tue Oct 10 07:46:48 PDT 2017

http://www.politico.com/tipsheets/morning-agriculture/2017/10/10/us-dairy-calls-for-end-to-canadian-supply-management-222716 <http://www.politico.com/tipsheets/morning-agriculture/2017/10/10/us-dairy-calls-for-end-to-canadian-supply-management-222716>

U.S. dairy calls for end to Canadian supply management
By CHRISTINE HAUGHNEY <http://www.politico.com/staff/christine-haughney>

10/10/2017 10:00 AM EDT
With Doug Palmer, Jenny Hopkinson and Helena Bottemiller Evich.

U.S. DAIRY CALLS FOR END TO CANADIAN SUPPLY MANAGEMENT:U.S. dairy producers are taking a hard line ahead of the fourth round of the NAFTA talks this week by urging the Trump administration to push for elimination of Canada’s supply management system. “I don’t know what the U.S. government is going to do, but we certainly are talking very clearly that we need complete elimination of [Canadian] tariffs,” said Jaime Castaneda, senior vice president for strategic initiatives and trade policy at the National Milk Producers Federation. “Once you eliminate tariffs, supply management goes.”

That’s a big demand, since Canadian officials from Prime Minister Justin Trudeau on down have vowed to vigorously defend the supply management system. In one example <https://www.politicopro.com/trade/story/2017/10/ontario-premier-on-nafta-rationality-will-prevail-162968>, Ontario Premier Kathleen Wynne told our colleagues at Morning Trade recently that supply management is a “very rational system.”

“We have to make sure we solve the right problem,” Wynne said. “If the problem is oversupply in the United States, then we need to have that conversation. If the problem is access to markets, then we should have that conservation.”

Dairy is a particularly sensitive issue on both sides of the border because it was one of the few agricultural sectors, along with poultry and eggs, that was not fully liberalized during the original NAFTA agreement. In addition, Canada has recently put in place policies to encourage more butter production that have fueled an oversupply of other products, like skim milk solids, which are being dumped onto world markets to the detriment of American and other dairy exporters, former U.S. chief agriculture negotiator Darci Vetter told Pro Trade's Doug Palmer.

Unless that issue is also addressed, any new market openings for U.S. dairy that take the form of an import quota could be meaningless, since Canadian processors already have ample access to skim milk powder and proteins at low prices, Vetter added. Castaneda underscored that point, emphasizing that U.S. dairy will consider the NAFTA renegotiation a “failure” if it does not fix that problem.

HAPPY TUESDAY, OCT. 10! Welcome to Morning Ag, where your host is happy to see that the Nobel Committee wisely awarded the economics prize to a man who can explain why Americans overeat and accrue debt <https://www.washingtonpost.com/news/wonk/wp/2017/10/09/american-professor-wins-nobel-prize-in-economics-for-trying-to-understand-irrational-human-behavior/?hpid=hp_hp-more-top-stories-2_nobel-620am%3Ahomepage%2Fstory&utm_term=.8ed99decf827>. I welcome all thoughts, scoops, tips, feedback, birthday shout-outs and wedding announcements! Send them to chaughney at politico.com <mailto:chaughney at politico.com> or @chaughney <http://go.politicoemail.com/?qs=b9f9f761ba369aa5bbe9e72c4fde25edb5fe2a5b5b8b2258f8d6140448374e9aaef435662fc8669208136f5443d0eee43d3e719acd91ee49>. Follow the whole team at @Morning_Ag <http://go.politicoemail.com/?qs=b9f9f761ba369aa58ccaeab6e883634087ae4efb94f1bd21103a8bc06fbb1968e0bc91f3657948846181b67667af64d093169ccc620f8e1d>.

MEXICO AND CANADA’S AG DEMANDS: The U.S. has already eliminated most agricultural tariffs through the NAFTA framework, except for dairy and sugar, so there is relatively little more Canadian and Mexican farmers can get from a new deal. But since both Mexico and Canada have long wanted FDA recognition to sell Grade A dairy products like fresh yogurt and fresh cheeses in the U.S., there could be pressure to allow those products in, Vetter said.

The U.S. and Mexico recently struck a sugar deal that takes care of the most immediate concerns on that front, but Canada continues to want to be able to export more refined sugar to the U.S., Vetter added. In addition, since Canada’s refineries have excess capacity, they'd like to be able to import raw sugar from other countries around the world, refine it, and have it count as Canadian when exported to the U.S. so it can enter duty-free, she added.

Investor-state NAFTA news: The Trump administration is expected to make its assault on NAFTA's investor-state dispute settlement process during this week's talks, coming out with a proposal that would effectively hobble the controversial arrangement, Pro Trade's Adam Behsudi reports. Pros, read that here <https://www.politicopro.com/agriculture/story/2017/10/trump-eyeing-nafta-proposal-to-roll-back-protections-for-foreign-investors-163145>.

WILL SPS INNOVATIONS IN TPP RESURFACE? Vetter said she hoped two of the Trans-Pacific Partnership’s innovations in food safety and plant and animal health regulations, otherwise known as sanitary and phytosanitary measures, will reappear in a revised NAFTA pact. One of those established an accelerated process to resolve SPS problems that are detected when agricultural goods are crossing the border, while another institutionalized cooperation between countries to resolve policy differences before they become full-fledged disputes, Vetter said.

While there are relatively few SPS disputes between the U.S., Canada and Mexico, a revised SPS chapter could help in both areas, Vetter said. Beyond NAFTA, the value of new SPS standards would be to establish a set of “best practices” that could be incorporated into future trade agreements the three countries reach, she said.

Conaway and co. report back from Canada: After House Agriculture Chairman Mike Conaway <https://cd.politicopro.com/member/51328> and four other House members pressed Canadian officials on the NAFTA talks in Ottawa this past weekend, they issued a joint statement <https://agriculture.house.gov/news/documentsingle.aspx?DocumentID=4103> where Conaway said he won’t back down. “U.S. production agriculture will continue to stay at negotiators' elbow throughout this process to ensure their interests are taken into account,” he said. “This is too important to screw up.”

Rep. Kurt Schrader <https://cd.politicopro.com/member/66882> expressed concerns that differences in areas like dairy, wheat and wine may be impossible to surmount. “It became obvious to me as we ended our visit that both sides will continue to support one another vigorously, but that the Canadians feel no urgency to come to the table in any of the above,” he said. Reps. David Rouzer <https://cd.politicopro.com/member/3787>, Ted Yoho <https://cd.politicopro.com/member/198759> and John Faso <https://cd.politicopro.com/member/133065> also made the trip.
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