Negotiating a revised North American Free Trade Agreement (NAFTA) with Canada is proving difficult, as specifics surrounding dairy trade are posing a challenge to reaching a final arrangement. Canada’s dairy supply management system utilizes quotas for production and prices to stabilize the country’s dairy market. American trade representatives are pushing for concessions in Canada’s dairy program and better access to the market.
The timing of the NAFTA negotiations brings an additional challenge, Quebec recently began a provincial election campaign. The Canadian dairy industry is small in number but significant in political influence. Exacerbating the issue is the fact that a significant number of dairy farms are located in Quebec. Many other farms are also clustered in some critical swing districts.
Canada is one of the biggest markets for American dairy products. According to the California Department of Food and Agriculture, of $1.4 billion in California dairy exports in 2016, roughly 12 percent of that went to Canada. The U.S. sent $792 million in dairy products to Canada in 2017, according to the U.S. Dairy Export Council. In contrast, the Canadian government claims the country exported only $149 million in dairy products to the U.S. during that time.
The recent trade arrangement that was agreed upon by the U.S. and Mexico may prove to be problematic if Canada is not included. Members of Congress have indicated that a trade deal requires Canada’s participation for it to be approved via fast-track authority, allowing a simple yes-or-no vote in Congress.
One outcome that seems likely is a concession to increase access, as negotiations have demonstrated Canada’s reluctance to abandon their supply management system. During the Trans-Pacific Partnership negotiations, Canada was willing to agree to more access into the market to facilitate better dairy trade. While it would put some strain on the Canadian industry, it may be a necessary compromise to reach an official agreement.