October 24, 2017

Vilsack: “Canadian Supply Management Can’t Be Sustained”

 |  By: Mike Opperman

With round 4 of negotiations complete around a revised North American Free Trade Agreement (NAFTA) it’s a good time to take a breath and reassess where affected parties stand in the ongoing debate.

As negotiations have unfolded, the most contentious debate was around Canada’s Class 7 pricing mechanism. The system has created a new price level for milk protein that has allowed Canada to price powder below global prices. Since the adoption of the system powder exports from Canada have risen significantly, putting the U.S. and other exporting countries at a significant disadvantage.

“Obviously our position is that Class 7 has to go, that it’s manipulating a system in a way that is unfair and not consistent with the spirit of international agreements,” Secretary Tom Vilsack, president and CEO of the U.S. Dairy Export Council told Mike Adams on AgriTalk this morning.

Curtailing the Class 7 system is part of the U.S. stance to force the termination of the Canadian supply management system. “Canadian supply management can’t be sustained if you are committed to open and free trade,” Vilsack says. “It’s unfair not only to U.S. producers but to producers all over the world and it’s also unfair to consumers in Canada who are basically paying a lot more for their dairy products than they would need to had they had an open system.”

As the debate with Canada rages on, Vilsack says it’s critically important to do no harm to the other party in the negotiations—Mexico. “We need to be able to preserve markets in Mexico so that we don’t create additional barriers to access,” he says. “Mexico is our number one market. If you start to see an imposing of tariffs and barriers then that market basically begins to peel off and we begin to lose market share to the EU or New Zealand.”

Whatever the outcome the negotiations might deliver, it’s important that the negotiations go on and that the U.S. doesn’t back out of NAFTA altogether.  “The worse thing that could happen would be for the U.S. to pull out of NAFTA from an agricultural perspective. It would be incredibly damaging to the agriculture economy and hope is that they can figure out a way to get to ‘yes’,” Vilsack says.  

When asked by AgriTalk host Mike Adams if there was any common ground available, Vilsack says the U.S. has given all they can give by establishing an open and transparent marketplace. “The challenge for us is to figure out a way to make the Canadian market far more open while not putting the U.S. or any other parties to this discussion in a position where they have to walk away from the table. We hope people will stay at the table long enough to figure out what that creative solution is,” Vilsack says. “There’s not much for us to give on the dairy side. And it’s time for Canadians to recognize that their system has to change.”

The U.S. administration had not put much emphasis on dairy or agriculture in general during the first three rounds of NAFTA negotiations. That changed with the fourth round and will likely continue as the next round opens in Mexico City in early November. Vilsack says that in order for agriculture to take a higher profile there needs to be a new dialogue about agriculture.

“It’s incumbent upon us in agriculture to begin talking about agriculture a little differently than we have in the past,” Vilsack says. “Ag in the U.S. is small part of economy, but when combined with food, the system employs 23 million people which is significantly higher than any other industry. That makes ag competitive with auto, steel and other industries often talked about in these trade negotiations.”

“Without farms, without food, we wouldn’t eat and we wouldn’t have 23 million jobs,” Vilsack says.  

See below to hear the entire AgriTalk interview with Secretary Vilsack.