The letter asked the U.S. President to push the matter to the World Trade Organization if the Canadian pricing continues.
“What’s happened to you is very unfair,” Trump said Tuesday. “It’s another very typical one-sided deal against the United States and its not going to be happening for very long.”
Canadian ambassador to the U.S. David McNaughton issued a response Tuesday evening. He issued a letter to to the U.S. governors countering their concerns by saying that dairy trade between the two countries favours the U.S. by a factor of 5 to 1.
He also pointed out that “Canada’s dairy industry is less protectionist than the U.S., which has employed technical barriers to keep Canadian dairy out of the U.S. market.”
He also said the U.S. is simply producing too much milk for a glutted world market and needs to manage their own supply better.
“Canada imports 6.3 per cent of its cheese, 10 per cent of its butter and 10 per cent of its milk powders, while the U.S. imports 3 per cent of its cheese, 3 per cent of its butter and 8 per cent of its milk powder, noticeably less than than Canadian imports.”
The issue came to a head a couple of weeks ago when Grassland Dairy Products notified at least 70 farms that it is cancelling their contracts as of May 1 because it has lost its business in Canada, according to the Milwaukee Journal-Sentinel.
“The reality is that Canadian provinces, starting last year with Ontario and now extending across the nation, are implementing what they call a ‘national ingredients strategy.’ This lowers the cost for processors to buy Canadian-made milk ingredients, undercutting the sales previously made by Grassland and other companies to Canada,” Chris Galen, a senior vice-president at the National Milk Producers Federation based in Arlington, Va., recently told the newspaper.
He acknowledged that Canada was not placing any tariffs on U.S. products but rather changing its pricing structure.
The Canadian counterargument is pretty simple. Canadian producers say the Americans are overproducing milk for an already glutted world market.
“To use a phrase that has recently come out of the U.S., Wisconsin farmers are using ‘alternative facts,’” Isabelle Bouchard, the director of communications and government relations at the industry group Dairy Farmers of Canada, told the Washington Post. “The Wisconsin people are trying to find an enemy — when in reality, the problem they have is that they’re overproducing.”
Backing Bouchard’s claim is a report titled “Situation and Outlook for the U.S. Dairy Industry” which was produced by the U.S. Department of Agriculture.
The report says, “The U.S. dairy industry produced record levels of milk in 2016 (212.4-billion pounds) but at the same time has been seeing a decrease in exports.”
At the same time, it also notes that demand for exports has diminished due to the strength of the U.S. dollar and decreased demand from certain importer nations, including China.
— With files from Reuters and the Canadian Press