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June 11, 2018

Trump’s 270% Canadian Dairy Tariff, Fact or Fiction?

 |  By: Anna-Lisa Laca

On Friday, President Trump sent a tweet that made dairy farmers’ hair stand on edge. 

Does Canada tax U.S. dairy imports at 270%? Let’s dig into the numbers. 

According to Pro Farmer Policy analyst Jim Wiesemeyer, Canada does have a 270% tariff on some dairy products, but the U.S. never pays them at that level. 

You see, Canada has two major paths for imports: those that fall under the Canadian quota and then surplus. This has to do with their supply management system which President Trump has openly asked them to get rid of. An ask Canadians are quick to write off as a crazy. 

“Where tariffs spike is the surplus avenue because the country's dairy policy is focused on avoiding a surplus -- supply management,” Wiesemeyer said. 

U.S. exports to Canada that are within quota face tariffs at a normal level. For example, U.S. milk that is shipped to Canada in a quantity that is within the amount specified within the North American Free Trade Agreement does not face duties. 

It’s U.S. milk exports to Canada beyond the agreed upon levels that face a surplus quota of 241%. Over surplus duties also exist for other dairy products including blended dairy powder at 270%, according to the World Trade Organization.

Canada’s defense is that all countries, including the U.S., subsidize their dairy industries and that Canada does so indirectly by closing its borders and capping production, Wiesemeyer said.

“President Trump isn’t going after the system of supply management as much as looking to dump surplus subsidized U.S. dairy products on the Canadian market,” said Pierre Lampron a seventh-generation Canadian dairy producer and president of Dairy Farmers of Canada. “The reality is their surplus is bigger than the 36 million Canadians can eat.”

According to Lampron, while Mexico is the No. 1 export market for U.S. dairy products, Canadians consume three times more U.S. dairy products per capita than Mexicans do. 

Still, the president’s tweets reaffirm U.S. dairy’s need for NAFTA.  

“We need to preserve what's working in Mexico, keep that market open, it’s our No. 1 market,” Tom Vilsack president and CEO of the U.S. Dairy Export Council told AgriTalk host Chip Flory. “But we clearly need to fix what's broken in Canada: Class 7, market access has to be expanded and this is the opportunity.”

NAFTA is incredibly important to the U.S. economy and the food and agriculture industry in the U.S., Vilsack said. 

“So, it's incredibly important that we get all of these negotiations right, and that we open up markets and not close them,” he said.  

When asked by Flory whether or not farmers can expect a successful NAFTA conclusion, Vilsack said: “Well, we have to. I don’t think there’s an alternative.”

According to Wiesemeyer, Trump and his trade officials proposed eliminating Canada’s system of supply management entirely over 10 years, during recent NAFTA 2.0 talks. Canada steadfastly refused.

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Comments

Can Canada now file a complaint under the new USMCA about the USA subsidizing their dairy farms?