tag:theconversation.com,2011:/es/topics/supply-management-49347/articlesSupply management – The Conversation2023-10-25T17:53:55Ztag:theconversation.com,2011:article/2140562023-10-25T17:53:55Z2023-10-25T17:53:55ZIn defence of Bill C-282: Canada’s supply management supports farmers while safeguarding consumers<iframe style="width: 100%; height: 100px; border: none; position: relative; z-index: 1;" allowtransparency="" allow="clipboard-read; clipboard-write" src="https://narrations.ad-auris.com/widget/the-conversation-canada/in-defence-of-bill-c-282-canadas-supply-management-supports-farmers-while-safeguarding-consumers" width="100%" height="400"></iframe>
<p>The recent passage of <a href="https://www.parl.ca/DocumentViewer/en/44-1/bill/C-282/third-reading">Bill C-282</a>, legislation that prevents Canadian trade negotiators from surrendering additional supply managed commodities — like eggs and dairy — in international trade negotiations, has reignited debates over Canada’s supply management system.</p>
<p>Canada’s supply management system is designed to align the production of dairy, eggs and poultry with domestic consumption through the judicious use of quotas and tariffs. </p>
<p>Critics of the bill <a href="https://nationalpost.com/opinion/no-party-wants-to-kill-this-bill-that-could-keep-groceries-more-expensive-forever">argue it may hamstring our trade negotiators and raise food prices</a>, claiming that Canada’s supply management system is designed to “constrain supply, strangle competition with tariffs and keep prices high” by limiting dairy, eggs and poultry imports from the United States.</p>
<p>However, there is no evidence to support these claims. This kind of criticism relies on outdated beliefs in the sanctity of the so-called free market and its ability to produce cheap goods.</p>
<p>If Canada wishes to preserve domestic farms and enhance food security, officials must have limits on what they can give up to American and other foreign interests. We argue the current supply management model works to provide competitive prices to consumers, while also providing a living wage for farmers.</p>
<h2>The Canadian model is working</h2>
<p>If the COVID-19 pandemic has demonstrated anything over the past several years, it’s that <a href="https://www.uc.utoronto.ca/eating-age-covid-19-food-security-canada-during-and-after-pandemic">local food production is necessary to ensure food security</a>. Evidence suggests that the global food system has <a href="https://doi.org/10.1080/03066150.2022.2129013">exacerbated environmental degradation and food insecurity</a> while consolidating power in the hands of a select few global food corporations.</p>
<p>It’s clear we need to invest in local, community-based food sources — something supply management is able to facilitate by the nature of its operation. The supply management model is focused on supplying food to the Canadian market, with very limited opportunity for exports. </p>
<p>Under this model, dairy and eggs are generally marketed in the region in which they are produced — <a href="https://grayridge.com/">Ontario eggs are sold</a> in Ontario supermarkets — thereby privileging the local.</p>
<p>Supply management also <a href="https://www.nfu.ca/campaigns/food-sovereignty/">reflects some of the concepts common to the food sovereignty movement</a>. Food sovereignty refers to the right for people to define their own food and agriculture systems and produce healthy and culturally appropriate food using ecologically sound and sustainable practices.</p>
<p>Food sovereignty puts community first, prioritizing local and regional food needs. Notably, Canada’s supply management system has been recognized as an <a href="https://www.nfu.ca/campaigns/supply-management/">important institution of food sovereignty</a> by the National Farmers Union because of its defense of local food production.</p>
<p>Canada’s supply management system also contributes to rural sustainability. Smaller dairy (an average farm size of 88 milking cows) and egg (an average farm size of 23,000 laying hens) farms provide a stability on rural concession roads that is unmatched when they are adequately supported. </p>
<p><a href="https://www.eggfarmers.ca/wp-content/uploads/2019/02/2019-02-20_Strengthening-Canadas-rural-economies.pdf">Supply-managed farms outshine their counterparts</a> in the hog, beef and oilseeds/grains sectors by making more investments, creating more jobs and contributing more to the GDP per farm.</p>
<h2>Fairer production</h2>
<p>Canada’s current supply management model works well for both consumers and producers. Producers reap the rewards of a system that ensures farmers are paid fair prices for their products, covering the costs of production. Meanwhile, consumers enjoy the benefits of a stable supply of eggs, safeguarding them from significant price fluctuations.</p>
<p>Supply management is a legitimate tool for co-ordinating production with demand and <a href="https://www.cirano.qc.ca/files/publications/2011DT-01.pdf">avoiding overproduction and waste</a> — two chronic issues that have plagued the United States and Europe, despite significant price supports, subsidies, government purchase programs and import restrictions.</p>
<p>In today’s economic landscape, ensuring food affordability is as critical as ever. Despite worldwide inflation, <a href="https://www.ctvnews.ca/business/food-inflation-how-canada-s-grocery-prices-compares-to-other-nations-1.6425009">Canada had the second-lowest food inflation rate in the world</a> at 8.9 per cent over the year from June 2022. This stands in contrast to the 19.6 per cent increase in the United Kingdom and the European Union, Hungary’s 45.1 per cent and Argentina’s staggering 95 per cent.</p>
<h2>Farmer wages</h2>
<p>The connection between fair farmer incomes and food sustainability and sovereignty must be emphasized.</p>
<p>If food producers can’t make a living, they will leave the industry and cause catastrophic consequences. This is already happening in some places. In the U.K., rising production costs and lower farm prices <a href="https://www.theguardian.com/business/2023/jul/29/uk-dairy-farmers-costs-milk-price-energy-feed-bills">are forcing farmers out of the industry</a> and jeopardizing the U.K.’s self-sufficiency in the dairy sector.</p>
<p>In Australia, <a href="https://www.weeklytimesnow.com.au/agribusiness/dairy/dairy-farmers-leaving-industry-amid-major-loss-of-confidence/news-story/895e4ac0662678640937beed170ceaa0">farmers are leaving dairy by the thousands</a> because of price crashes. Meanwhile, in New Zealand, the world’s largest exporter of dairy, <a href="https://www.stuff.co.nz/business/farming/agribusiness/131610390/indebted-dairy-farmers-in-for-a-tough-time-as-milk-price-weakens-while-costs-go-nuts">the livelihoods of dairy farmers remain precarious</a>. Egg prices in New Zealand increased year-over-year <a href="https://www.rnz.co.nz/news/national/492153/here-s-why-egg-prices-are-still-climbing-according-to-the-industry">by 75 per cent in June</a>.</p>
<p>Even in the U.S., <a href="https://edairynews.com/en/selling-cows-dairy-farmers-business/">the story is similar</a>. Rapidly rising input costs like fuel, insurance, feed prices and labour costs, combined with stagnant or lower milk prices, have led farmers to depart that industry.</p>
<p>As supermarkets, middlemen and global food corporations pay farmers less and input costs go up, this situation has been aptly called “<a href="https://www.stuff.co.nz/business/farming/opinion/300590422/higher-farming-costs-will-quickly-start-eating-into-dairy-profits">a cost of farming crisis</a>.”</p>
<h2>Deregulation threatens sustainability</h2>
<p>The recent passage of Bill C-282, and the discussion of the bill in the Senate, presents an opportunity to reflect on the importance of food systems that serve to enhance Canadian food sustainability, security and sovereignty. As the earlier international examples make clear, deregulation in dairy farming has not led to vibrant, sustainable industries, but quite the opposite. </p>
<p>Further proof is highlighted by <a href="https://www.theguardian.com/environment/2023/jan/31/us-dairy-policies-hurt-small-farms-monopolies-get-rich">food policy analysts in the U.S.</a> who are calling on the government to reform dairy policies they argue have caused “devastating farmer loss and hardship, and a worsening environmental outlook.” </p>
<p>A recent <a href="https://www.foodandwaterwatch.org/2023/01/31/new-report-exposes-corporate-monopolies-driving-u-s-dairy-crisis/">Food and Water Watch report</a> illustrates how U.S. dairy policies centred around export markets have hurt family-sized farms by slashing on-farm profits, encouraging extreme industry consolidation and increasing environmental degradation and exploitative practices of resources. </p>
<p>Bill C-282 attempts to protect a domestic system that rejects this model. Policymakers and all Canadians should work to support systems that allow for valuable food industries to flourish, rather than dismantle them.</p><img src="https://counter.theconversation.com/content/214056/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bruce Muirhead receives funding from Egg Farmers of Canada.</span></em></p><p class="fine-print"><em><span>Jodey Nurse has received funding from Egg Farmers of Canada in the past. Her current work is not funded by them.</span></em></p>If Canada wishes to preserve domestic farms and enhance food security, officials must have limits on what they can concede to American and other foreign interests.Bruce Muirhead, Professor of History and Egg Farmers of Canada Chair in Public Policy, University of WaterlooJodey Nurse, Faculty Lecturer, McGill Institute for the Study of Canada, McGill UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1838022022-06-12T12:11:29Z2022-06-12T12:11:29ZWhy New Zealand is right to call out Canada on its dairy industry<figure><img src="https://images.theconversation.com/files/468042/original/file-20220609-11181-4xqg8h.jpg?ixlib=rb-1.1.0&rect=0%2C95%2C3746%2C2095&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A cow waits in a paddock after milking on a farm near Oxford, New Zealand. New Zealand exports 95 per cent of its dairy products, and is challenging Canada's protection of its dairy market.</span> <span class="attribution"><span class="source">(AP Photo/Mark Baker)</span></span></figcaption></figure><iframe style="width: 100%; height: 100px; border: none; position: relative; z-index: 1;" allowtransparency="" allow="clipboard-read; clipboard-write" src="https://narrations.ad-auris.com/widget/the-conversation-canada/why-new-zealand-is-right-to-call-out-canada-on-its-dairy-industry" width="100%" height="400"></iframe>
<p>When it comes to dairy and free trade, Canada wants it both ways. New Zealand’s dairy dispute with Canada reveals the ongoing tensions within Canada’s trade agenda. </p>
<p>On May 12, New Zealand <a href="https://www.mfat.govt.nz/assets/Trade-General/WTO-Disputes/Request-for-consultations-by-New-Zealand-regarding-Canadas-allocation-of-dairy-TRQs-under-CPTPP.pdf">requested consultations</a> with Canada over its administration of dairy Tariff Rate Quotas, known as TRQs. </p>
<p>TRQs are the reserved amounts of a good that are free from existing tariffs. Canada maintains high tariffs on dairy products to insulate its industry from foreign competition — but TRQs are exempt from these. These TRQs are broken down into different categories, like butter or milk powders.</p>
<p>Under the Comprehensive and Progressive Trans Pacific Partnership (CPTPP), <a href="https://www.international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/tpp-ptp/text-texte/02-ad-03.aspx?lang=eng">Canada allows other countries to sell their dairy products at low tariffs</a> for a set amount. The challenge is how to administer these amounts or TRQs. New Zealand maintains that Canada’s administrative methods are undercutting its CPTPP commitments to freer trade among signatories.</p>
<p>The problem for Canada is that New Zealand’s case is strong. </p>
<h2>New Zealand’s case against Canada</h2>
<p>New Zealand’s trade dispute alleges that Canada’s TRQ administration is reducing its market value by underfilling its dairy TRQs. As a result, New Zealand is not getting enough of its dairy products to Canada, and the products Canada does import are of lower value. New Zealand attributes this to Canada’s exclusive “pooling” of TRQs to processors. </p>
<p>Since 1995, <a href="https://doi.org/10.1017/S1068280500001489">Canada has administered its TRQs in pools</a> that separated by their location in supply chains. For example, <a href="https://www.international.gc.ca/trade-commerce/controls-controles/notices-avis/1048.aspx?lang=eng">85 per cent of Canada’s milk TRQs</a> under the CPTPP are reserved for dairy processors that make products like cream and dairy powders. </p>
<p>Canada’s TRQ administration is skewed, given the vast majority of dairy products are allocated to processors instead of retailers. This means the countries that are a part of the CPTPP cannot get their products directly onto Canadian store shelves.</p>
<figure class="align-center ">
<img alt="Sealtest blue and red cartons and bags of milk on grocery store shelves." src="https://images.theconversation.com/files/468046/original/file-20220609-8276-wtn2nf.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/468046/original/file-20220609-8276-wtn2nf.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/468046/original/file-20220609-8276-wtn2nf.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/468046/original/file-20220609-8276-wtn2nf.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/468046/original/file-20220609-8276-wtn2nf.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/468046/original/file-20220609-8276-wtn2nf.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/468046/original/file-20220609-8276-wtn2nf.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Canadian milk and dairy products line a grocery store shelf in Aylmer, Que.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Sean Kilpatrick</span></span>
</figcaption>
</figure>
<p>This is a major problem for a couple reasons. First, Canada’s allocation of dairy TRQs make it <a href="https://www.cbc.ca/news/politics/canada-new-zealand-supply-management-1.6451198">more difficult to maximize what the agreement allows for imports</a>. In other words, it undermines efforts by countries like New Zealand to sell their products in Canada. Early signs seem to show this is the case.</p>
<p>Second, <a href="https://financialpost.com/news/economy/new-zealand-starts-trade-dispute-against-canada-in-growing-dairy-backlash">processors are more likely to buy cheaper products</a> as inputs to more expensive goods. For example, an ice cream sandwich is a product manufactured using other — usually cheaper — dairy products. This could mean lost profit for New Zealand producers.</p>
<p>Fortunately for New Zealand’s case, the CPTPP is more thorough than other agreements. It specifies that TRQs are to be “<a href="https://www.international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/tpp-ptp/text-texte/02.aspx?lang=eng">no more administratively burdensome than absolutely necessary</a>.” The agreement adds that countries cannot “allocate any portion of the quota to a producer group” or “limit access to an allocation to processors.”</p>
<h2>Canada has lost before</h2>
<p>If Canada loses the panel decision on the matter, it wouldn’t be the first time. The United States <a href="https://financialpost.com/news/economy/u-s-and-canada-both-claim-victory-in-dairy-quota-trade-dispute">successfully advanced</a> a similar request for consultation under the Canada-United States-Mexico Agreement. </p>
<p>The American dispute <a href="https://www.worldtradelaw.net/document.php?id=usmca/cr/canada-dairytrq-cr.pdf&mode=download#page=1">also identified</a> Canadian pooling as unfair and inequitable. Canada argued that a processor pool does not constitute an allocation under the agreement. Canada added that the Americans were aware of its TRQ administration and therefore tacitly accepted it.</p>
<p>These arguments <a href="https://www.worldtradelaw.net/document.php?id=usmca31/canada-dairytrq(usmca).pdf&mode=download#page=53">failed to convince the panel</a> and Canada has yet to comply with this ruling. It seems doubtful Canada would succeed under CPTPP either, as both agreements have similar TRQ stipulations.</p>
<p>The better question is why Canada put itself in this position in the first place.</p>
<figure class="align-center ">
<img alt="Dairy cows poke their heads through metal bars to eat hay in a barn." src="https://images.theconversation.com/files/468058/original/file-20220609-11224-msscaf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/468058/original/file-20220609-11224-msscaf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=449&fit=crop&dpr=1 600w, https://images.theconversation.com/files/468058/original/file-20220609-11224-msscaf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=449&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/468058/original/file-20220609-11224-msscaf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=449&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/468058/original/file-20220609-11224-msscaf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=565&fit=crop&dpr=1 754w, https://images.theconversation.com/files/468058/original/file-20220609-11224-msscaf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=565&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/468058/original/file-20220609-11224-msscaf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=565&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Dairy cows are seen at a Québec farm.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Ryan Remiorz</span></span>
</figcaption>
</figure>
<h2>Canada’s trade agenda</h2>
<p>Since Canada’s first trade agreement, there has been clear tension because even though Canadian policymakers want free trade, they also want some sectors to be exempt. Canada is not unique to agricultural exceptionalism, but <a href="https://doi.org/10.1093/jiel/jgv022">it is among the world leaders of this practice</a>. </p>
<p>While early trade agreements navigated this tension, recent agreements have struggled to do the same. Canada’s last three major trade agreements have each conceded more access to the Canadian market for foreign dairy producers. In return, Canada has <a href="https://www.canada.ca/en/agriculture-agri-food/news/2021/12/third-round-of-compensation-now-available-for-canadian-dairy-farmers.html">offered direct compensation</a> to dairy farmers and processors.</p>
<p>This shift in trade policy comes at a moment where free trade is <a href="https://doi.org/10.1080/03932729.2020.1786927">under greater scrutiny</a>. While trade partners like the <a href="https://theconversation.com/canada-should-look-inward-to-address-american-protectionism-172274">United States</a> are backing away from trade agreements, Canada is stepping forward.</p>
<p>This is part of Canada’s new trade strategy, the <a href="https://www.international.gc.ca/gac-amc/campaign-campagne/inclusive_trade/index.aspx?lang=eng">Inclusive Trade Agenda</a>. This agenda aims to bring historically marginalized groups into trade. Women, Indigenous Peoples and the middle class are among these groups.</p>
<p>Global Affairs Canada adds that “<a href="https://www.international.gc.ca/trade-commerce/gender_equality-egalite_genres/approach-can-approche.aspx?lang=eng">communicating the benefits of trade and investment</a>” is a key goal of the agenda, which seeks to curb “a perception of negative or divergent effects of trade and investment.” But this is more than a perception.</p>
<p>The Inclusive Trade Agenda is as much substantive trade policy reform as it is a re-branding effort. The agenda communicates Canada’s renewed commitment to free trade. </p>
<h2>Selective free trade</h2>
<p>The problem is that Canada is selectively embracing economic liberalization. Canada wants free trade only for some aspects of its economy. Canada’s trade policy is torn between two pathways.</p>
<p>There is nothing inherently wrong with insulating the dairy industry from foreign competition. Good arguments can be made in favour of exempting it.</p>
<p>But Canada can no longer have it both ways. Canada cannot concede on dairy then backtrack on those commitments while advocating for rules-based agreements. </p>
<p>The contradictions in Canada’s trade agenda have never been more evident. New Zealand’s dispute is a reminder that Canada must make difficult choices. </p>
<p>Canada can either promote a restrained trade agenda with few concessions, or fully embrace liberalization. Trying to do both will accomplish neither.</p><img src="https://counter.theconversation.com/content/183802/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Noah Fry does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>New Zealand is accusing Canada of undercutting its commitments under the Comprehensive and Progressive Trans Pacific Partnership on dairy. Canada’s problem is that New Zealand’s case is strong.Noah Fry, PhD Candidate, Political Science, McMaster UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1179632019-06-11T23:09:02Z2019-06-11T23:09:02ZLab-grown dairy: The next food frontier<figure><img src="https://images.theconversation.com/files/278583/original/file-20190609-52748-3q3tgx.jpg?ixlib=rb-1.1.0&rect=45%2C0%2C5053%2C3305&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Could dairy products soon be produced in labs?</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><p>Lab-grown meat is getting a lot of attention along with plant-based meat substitutes. Technology is driving the industry toward providing alternatives to conventionally produced food products. Dairy proteins may be the next product produced in a lab, for use in fluid “milk” production and processed dairy products like yogurt and cheese, to name a few.</p>
<p>Winston Churchill predicted the rise of <a href="https://www.vice.com/en_us/article/ezzeye/winston-churchill-predicted-synthetic-lab-grown-meat-in-1931">synthetic foods</a> in 1931.</p>
<blockquote>
<p>“We shall escape the absurdity of growing a whole chicken in order to eat the breast or wing, by growing these parts separately under a suitable medium. Synthetic food will, of course, also be used in the future.” </p>
</blockquote>
<p>While it took longer than 50 years, his prediction is coming true with meat proteins and now dairy proteins.</p>
<h2>What is synthetic dairy?</h2>
<p><a href="https://www.perfectdayfoods.com/">Perfect Day Inc.,</a> a California-based start-up, has recreated the proteins found in conventional cow’s milk without the use of animals. The company developed a form of genetically modified microflora that produces both <a href="https://www.healthline.com/nutrition/casein-vs-whey">whey and casein</a> through a fermentation process. </p>
<p>The approach can be loosely compared to the use of brewer’s yeast to produce alcohol. Yeast is used in controlled environments to create fermentation byproducts and the two processes simply employ different yeasts for a different purpose and output.</p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/278584/original/file-20190609-52785-g8w4k8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/278584/original/file-20190609-52785-g8w4k8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/278584/original/file-20190609-52785-g8w4k8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/278584/original/file-20190609-52785-g8w4k8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/278584/original/file-20190609-52785-g8w4k8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/278584/original/file-20190609-52785-g8w4k8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/278584/original/file-20190609-52785-g8w4k8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Could she be headed for an early retirement?</span>
<span class="attribution"><span class="source">Amanda Kerr/Unsplash</span></span>
</figcaption>
</figure>
<p>Perfect Day says their product is the exact same as the protein found in cow’s milk. <a href="http://milkfacts.info/Nutrition%20Facts/Nutritional%20Components.htm">Conventional milk</a> is approximately 3.3 per cent protein, of which 82 per is casein and 18 per cent is whey. The other main elements are water, fat and carbohydrates. </p>
<p>Perfect Day has the technology to remake the small fraction of milk that is protein, arguably the most important component to produce other foods. The company suggests that its dairy protein is vegan and lactose-free, while providing the same high-quality nutrition as conventional dairy protein. This could have significant appeal for consumers.</p>
<h2>Tough to mimic full-fat milks</h2>
<p>Milk produced by dairy cattle is a versatile ingredient used in various products worldwide. More than <a href="https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=3210011301">70 per cent of milk sold</a> from Canadian farms in 2019 is used for further processing, leaving the remainder to be consumed as fluid milk.</p>
<p>It may be difficult to produce full-fat milks that mimic the taste and texture of cow’s milk. Protein is just one component of fluid milk; milk fat is another, which would likely be the most difficult to mimic with plant-based alternatives. The structure of milk fat provides a specific taste and mouth feel when drinking milk, and this may be a tougher formulation challenge than creating proteins to be used in cheese or yogurt. </p>
<p>The early focus of Perfect Day’s communication was on fluid milk — the kind we drink —but the company has shifted its focus to processed products. </p>
<p>Perfect Day has partnered with food production powerhouse <a href="https://www.adm.com/">Archer Daniels Midland (ADM)</a>, among others, to move towards full-scale production. The company is one of the world’s largest agricultural processors and food ingredient providers with more than 330 manufacturing facilities in almost 200 countries. ADM supplies a vast list of ingredients for both human and animal consumption; synthetic dairy protein may be a perfect addition to their offerings.</p>
<p>Products such as yogurt and cheese are different than fluid milk, and may be more suitable for using lab-grown casein and whey. The synthetic proteins could be used to replace dairy milk ingredients or to complement them.</p>
<p>In <a href="http://www.milkfacts.info/Milk%20Processing/Yogurt%20Production.htm">yogurt production</a>, for example, protein is often added to improve texture. There are differing proportions of milk components in various processed products. This means that fermented casein and whey proteins could augment or replace conventional protein ingredients. This is easier to do in products with high-protein ingredients.</p>
<p>That said, the potential use of animal-free dairy protein goes far beyond traditional dairy products such as cheese and yogurt. Hot dogs that contain milk powder and granola bars that contain modified milk ingredients are examples of the many foods that could use this alternative dairy protein.</p>
<h2>Tackling malnutrition?</h2>
<p>Perfect Day CEO Ryan Pandya <a href="https://www.linkedin.com/pulse/perfect-day-2018-ryan-pandya?trk=related_artice_Perfect%20Day%20in%202018_article-card_title">said last year</a>: “We began to look into how we can use our protein to prevent stunted growth and malnutrition in the developing world.” This suggests Perfect Day’s focus is on providing ingredients rather than producing milk.</p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/278586/original/file-20190609-52776-1tfww9z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/278586/original/file-20190609-52776-1tfww9z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/278586/original/file-20190609-52776-1tfww9z.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/278586/original/file-20190609-52776-1tfww9z.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/278586/original/file-20190609-52776-1tfww9z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/278586/original/file-20190609-52776-1tfww9z.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/278586/original/file-20190609-52776-1tfww9z.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">We’ve long had an alternative to butter – margarine. But a lot of consumers prefer butter.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<p>Some products aren’t well-suited to this approach. Butter, for example, is made from milk fat and has almost no protein. We’ve long had a plant-based alternative to butter — margarine. But many consumers moved away from margarine and back to butter. </p>
<p>The Canadian <a href="http://www.cdc-ccl.gc.ca/CDC/index-eng.php?id=3800">per capita consumption of butter</a> increased from 2.72 kilograms to 3.21 kilograms from 2007 to 2016. This increase in butter demand has led to an <a href="http://www.agrifoodecon.ca/uploads/userfiles/files/logic%20of%20milk%20marketing%20trends%20briefing%20note-%20may%2025%202016.pdf">excess of milk protein</a> in the marketplace in both Canada and the United States.</p>
<p>While it remains to be seen if these fermented proteins can be produced economically, their introduction into the marketplace could cause significant disruption to the dairy industry. The disruption would be due in part to switching some processed products away from conventional dairy proteins.</p>
<p>There would be additional disruption because of the change in relative demand for protein and other milk components. We would likely end up with more significant surpluses of proteins from both conventional dairy and synthetic production.</p>
<h2>The future</h2>
<p>Many issues need to be resolved before these products arrive in our supermarkets. The economics of production have to work. Products need to be reformulated to incorporate the fermented proteins with other ingredients to replace the milk components.</p>
<p>The Canadian Food Inspection Agency currently <a href="http://www.inspection.gc.ca/about-the-cfia/acts-and-regulations/list-of-acts-and-regulations/documents-incorporated-by-reference/canadian-standards-of-identity-volume-1/eng/1521473554991/1521473555532">describes milk</a> as being produced by an animal. The U.S. Food and Drug Administration has not yet made a policy statement on classifying synthetic milk proteins. </p>
<p>Milk in Canada is also subject to a supply management system that includes quota for production. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/how-the-dairy-lobbys-cash-grab-put-canada-in-trumps-crosshairs-102974">How the dairy lobby's cash grab put Canada in Trump’s crosshairs</a>
</strong>
</em>
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<p>Will synthetic casein and whey be subject to the same system? The regulatory environment will require significant clarification, and any changes will be vigorously debated by various interests.</p>
<p>Some consumers will highly value the fact that animals are not required to produce these proteins, creating a vegan, lactose-free product. There will also be a perception that synthetic dairy proteins will have a smaller environmental footprint. </p>
<p>Other consumers will likely have concerns that the proteins are produced using a genetically modified yeast.</p>
<p>Despite these uncertainties, we will likely see synthetic dairy products on grocery shelves within a few years.</p><img src="https://counter.theconversation.com/content/117963/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>
Michael von Massow receives funding from the Ontario Ministry of Agriculture and Food to research issues in food waste and nutrition labeling for restaurant menus. He has received funding from the Walmart Foundation to explore food waste at the household level. He has received money from the Tim Hortons Sustainable Food Management Fund to explore consumer attitudes to antibiotic use and animal welfare. He has also received funding from Longo's Brothers Markets in support of research into consumer behaviour in food retail.</span></em></p><p class="fine-print"><em><span>Mitchell Gingerich does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Dairy proteins may be the next product to be mass produced in labs, for use in fluid “milk” production and processed dairy products like yogurt and cheese.Michael von Massow, Associate Professor, Food Economics, University of GuelphMitchell Gingerich, Graduate Research Assistant, Department of Food, Agriculture and Resource Economics, University of GuelphLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1114692019-02-12T22:48:21Z2019-02-12T22:48:21ZFrom cannabis edibles to plant proteins: 2019 food trends<figure><img src="https://images.theconversation.com/files/258383/original/file-20190211-174857-b1nlw3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Plant-based foods, including fruits and vegetables, will be more popular this year.</span> <span class="attribution"><span class="source">Sydney Rae/Unsplash</span></span></figcaption></figure><p>Food continues to find its way into the consciousness of Canadians. </p>
<p>It’s in our news feed, on our television screens and, more and more, part of our day-to-day conversations. The challenge is to separate the fact from the fiction, the ephemeral from the soon-to-be everyday. The University of Guelph’s newest <a href="https://www.foodfocusguelph.ca/trends-report">Food Focus Trends Report</a> highlights six key trends likely to be front and centre this year.</p>
<h2>Flexitarians on the rise</h2>
<p>While vegans and vegetarians get all the attention, the <a href="https://www.foodfocusguelph.ca/blog/the-new-food-guide-a-reflection-or-driver-of-change">flexitarians</a> are rapidly growing in number — and in clout. A flexitarian is someone who is eating less meat rather than giving it up entirely.</p>
<p>Almost 85 per cent of Canadians claim to eat at least one vegetarian meal per month, with nearly 50 per cent saying they do so at least once a week. Despite only seven to eight per cent of Canadians identifying as vegetarian or vegan, the conscious consumption of flexitarians will likely have a profound impact on the quantity and types of meat we eat as well as spurring the growth of protein alternatives. </p>
<p>By choosing to eat less meat, consumers are likely to indulge in more premium cuts while sacrificing staples like ground beef.</p>
<p>Plant-based proteins are also sure to grow in popularity, as are those from previously taboo sources, such as insects. Canada’s new <a href="https://food-guide.canada.ca/en/">Food Guide</a> also recommends an increased focus on plant-based foods.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/in-defence-of-canadas-food-guide-110347">In defence of Canada's Food Guide</a>
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</em>
</p>
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<p>Should Canada’s meat industry be concerned? Possibly, but increased international demand should keep overall prices in our country steady for the foreseeable future and population growth here will also continue to increase the total demand for meat.</p>
<h2>Easing fears about gene-editing</h2>
<p>If comic books and horror movies have taught the average Canadian anything, it’s that nothing good ever comes from playing with genes. </p>
<p>Unfortunately, fiction can sometimes be more believable than facts. When it comes to agriculture, gene editing increases yields, develops tolerances to things like drought or pests, removes allergens (to make gluten-free wheat, for example) and enhances nutritional quality. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/258306/original/file-20190211-174870-1wf7jfx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/258306/original/file-20190211-174870-1wf7jfx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/258306/original/file-20190211-174870-1wf7jfx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/258306/original/file-20190211-174870-1wf7jfx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/258306/original/file-20190211-174870-1wf7jfx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/258306/original/file-20190211-174870-1wf7jfx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/258306/original/file-20190211-174870-1wf7jfx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">The Canadian government approved the sale of genetically modified golden rice that’s fortified with Vitamin A. It’s an example of a GM food that directly benefits consumers.</span>
<span class="attribution"><span class="source">Josep Folta/Flickr</span></span>
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</figure>
<p>And the <a href="https://www.foreignaffairs.com/articles/2018-04-10/gene-editing-good">biggest benefit</a> may be for the world’s poor. Basically, gene editing is doing what animal and plant breeders have been doing for hundreds and hundreds of years, only in a way that’s much faster, much cheaper and much more specific. </p>
<p>The only challenge? Reducing unfounded fears and communicating the incredible potential of genetically modified crops and foods in a way that Canadians can fully embrace.</p>
<h2>Protecting our pollinators</h2>
<p>In recent years, the humble bee has gone from picnic pest to cause célèbre. The decline of bee populations and its potential impact on food resources has Canadians rallying in support. And with good reason — <a href="https://doi.org/10.1098/rspb.2006.3721">a third of the world’s crops rely on pollinators</a>.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/258308/original/file-20190211-174861-1s5a1wp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/258308/original/file-20190211-174861-1s5a1wp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=395&fit=crop&dpr=1 600w, https://images.theconversation.com/files/258308/original/file-20190211-174861-1s5a1wp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=395&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/258308/original/file-20190211-174861-1s5a1wp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=395&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/258308/original/file-20190211-174861-1s5a1wp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=496&fit=crop&dpr=1 754w, https://images.theconversation.com/files/258308/original/file-20190211-174861-1s5a1wp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=496&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/258308/original/file-20190211-174861-1s5a1wp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=496&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">A third of the world’s crops need pollinators like bees. But some of them also require pesticides that are harmful to bees.</span>
<span class="attribution"><span class="source">Jenna Lee/Unsplash</span></span>
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</figure>
<p>In Canada, the contribution of bees to crops like apples, blueberries and canola <a href="http://www.agr.gc.ca/eng/industry-markets-and-trade/canadian-agri-food-sector-intelligence/horticulture/horticulture-sector-reports/statistical-overview-of-the-canadian-honey-and-bee-industry-and-the-economic-contribution-of-honey-bee-pollination-2016/?id=1510864970935#a5">has been estimated at over $5 billion.</a> </p>
<p>So shouldn’t we all be behind the bee? It’s not that simple. </p>
<p>While they are essential for some crops, other crops rely on methods of pest control that are associated with the decline of pollinators. </p>
<p>As we’ve seen with the neonicotinoids debate, striking a delicate balance between the needs of farmers and the protection of pollinators is an ongoing challenge and a goal that will not be easily achieved.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/why-its-time-to-curb-widespread-use-of-neonicotinoid-pesticides-96620">Why it's time to curb widespread use of neonicotinoid pesticides</a>
</strong>
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<h2>Canada is high on cannabis edibles</h2>
<p>Cannabis will soon be a major driver in the food and beverage category. This year should see edible products incorporated into Bill C-45 (the Cannabis Act), opening up opportunities for health foods and supplements, snack foods, packaged meals, restaurants and tourism.</p>
<p>A recent <a href="https://www2.deloitte.com/content/dam/Deloitte/ca/Documents/consulting/ca-cannabis-2018-report-en.PDF">Deloitte report</a> found that 58 per cent of current Canadian cannabis users intend to consume edibles once they’re legalized. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/258310/original/file-20190211-174880-uqlyx1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/258310/original/file-20190211-174880-uqlyx1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/258310/original/file-20190211-174880-uqlyx1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/258310/original/file-20190211-174880-uqlyx1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/258310/original/file-20190211-174880-uqlyx1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/258310/original/file-20190211-174880-uqlyx1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/258310/original/file-20190211-174880-uqlyx1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Most Canadian cannabis users say they intend to consume edibles once they’re legal.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
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</figure>
<p>But these highs do have some potential lows — work will need to be done to ensure proper dosing and to prevent unintended secondary consumption by children and pets. </p>
<p>As well, the path to market for cannabis products in Canada goes through three different pieces of legislation: the Cannabis Act, the Controlled Drugs and Substances Act and the Food and Drugs Act. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/how-to-keep-your-pets-safe-from-marijuana-poisoning-109134">How to keep your pets safe from marijuana poisoning</a>
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</em>
</p>
<hr>
<p>In addition, products for medical consumers must also meet the Access to Cannabis for Medical Purposes Regulations that are included in the Controlled Drugs and Substances Act. But with the total market estimated at more than $7 billion (on par with Canada’s wine industry), the future is nonetheless bright for cannabis companies.</p>
<h2>Prospering in a time of protectionism</h2>
<p>The whirlwind of trade deals and disputes in the past few years has left many Canadians reeling. While there has been much hand-wringing over inter-provincial barriers, NAFTA/USMCA and new agreements with Europe and the Pacific Rim, freer trade in food has actually provided Canadian farmers with markets that are hungry for our products. </p>
<p>Plus, Canadian consumers have benefited and now enjoy a wider range of affordable food products. </p>
<p>The one downside? Our regulated dairy industry, along with other supply managed commodities, has ceded nearly 10 per cent of its market through recent trade deals.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/in-defence-of-canadas-dairy-farmers-105774">In defence of Canada's dairy farmers</a>
</strong>
</em>
</p>
<hr>
<p>This will not only be painful for the dairy sector, but it isn’t likely to result in lower prices for Canadians — although we will probably see a broader array of cheeses and other dairy products. Overall, though, trade has been good for Canada and will continue to be for the foreseeable future.</p>
<h2>Growing divide between food & farms</h2>
<p>Farms may feed people, but they have very little to do with the price you pay for food. </p>
<figure class="align-left zoomable">
<a href="https://images.theconversation.com/files/258314/original/file-20190211-174861-1rhvxyg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/258314/original/file-20190211-174861-1rhvxyg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/258314/original/file-20190211-174861-1rhvxyg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=445&fit=crop&dpr=1 600w, https://images.theconversation.com/files/258314/original/file-20190211-174861-1rhvxyg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=445&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/258314/original/file-20190211-174861-1rhvxyg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=445&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/258314/original/file-20190211-174861-1rhvxyg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=559&fit=crop&dpr=1 754w, https://images.theconversation.com/files/258314/original/file-20190211-174861-1rhvxyg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=559&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/258314/original/file-20190211-174861-1rhvxyg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=559&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">A farmer is seen on his Nova Scotia farm in 2014 with some of his laying hens.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Andrew Vaughan</span></span>
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</figure>
<p>Fluctuating prices of agricultural commodities like corn, wheat or soybeans often fuel news stories but the reality is the increases in food prices Canadians have seen over the years have been relatively consistent. </p>
<p>Put simply, food and farm prices are not the same and the relationship between the two continues to weaken. Today, the <a href="https://www.fb.org/market-intel/farmers-share-of-food-dollar-at-record-low">farmers’ share</a> of the food dollar is around 20 per cent — higher for less processed foods (nearly 50 per cent for eggs) and lower for more processed foods (two per cent for corn, which is used as a sweetener in manufactured food products). </p>
<p>While the effect of low commodity prices may be felt in farming regions and associated industries, it has little impact on Canadians when they’re checking off their grocery lists — and that isn’t expected to change in 2019.</p><img src="https://counter.theconversation.com/content/111469/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michael von Massow receives funding from the Ontario Ministry of Agriculture and Food to research issues in food waste and nutrition labeling for restaurant menus. He has received funding from the Walmart Foundation to explore food waste at the household level. He has received money from the Tim Hortons Sustainable Food Management Fund to explore consumer attitudes to antibiotic use and animal welfare. He has also received funding from Longo's Brothers Markets in support of research into consumer behaviour in food retail.</span></em></p><p class="fine-print"><em><span>Aaron De Laporte receives funding from the Ontario Ministry of Agriculture, Food and Rural Affairs. </span></em></p><p class="fine-print"><em><span>Alfons Weersink receives funding from the Ontario Ministry of Agriculture, Food and Rural Affairs, and the Canada First Research
Excellence Fund’s Food from Thought Initiative. </span></em></p><p class="fine-print"><em><span>Liam D. Kelly does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The six food trends likely to be front and centre in 2019.Michael von Massow, Associate Professor, Food Economics, University of GuelphAaron De Laporte, Research Associate, University of GuelphAlfons Weersink, Professor, Dept of Food, Agricultural and Resource Economics, University of GuelphLiam D. Kelly, Ph.D. Candidate, University of GuelphLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1057742018-10-30T21:57:03Z2018-10-30T21:57:03ZIn defence of Canada’s dairy farmers<figure><img src="https://images.theconversation.com/files/242525/original/file-20181026-7074-qw35ic.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Canada's dairy industry is being increasingly put at risk in trade negotiations. A visit to a Canadian dairy farm illuminates why the industry should be protected. </span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><p>At 8 a.m. one recent morning, when the milking of 110 cows was complete, I helped Jeannie van Dyk feed her calves and give them clean bedding. Van Dyk has not lost any calves due to excellent biosecurity and their housing and feeding regimes.</p>
<p>All the calves at Lellavan Farms in Noel Shore, N.S., are fed warm water, which helps them avoid getting chilled. The calf hutches are modular, allowing them to be taken down for cleaning. The space is being moved to a positive air-pressure system to ensure protection from disease. </p>
<p>The calves are fed milk twice daily, individually according to size, appetite and age. Then they’re taught to drink from a bucket and they start solid food at around three weeks.</p>
<p>At 8:20, the milk tanker arrived, collecting 8,000 litres that would soon reach homes across the province. The conversation at the farm shifted from cows to macro forces shaping the Lellavan Farm family’s world: Supply management and international trade deals.</p>
<h2>At the centre of trade talks</h2>
<p>Our dairy industry has been in the news a lot in recent years as a focal point in Canada’s many international trade negotiations.</p>
<p>First, there was the <a href="http://www.international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/ceta-aecg/index.aspx?lang=eng">Comprehensive Economic and Trade Agreement</a> between Canada and the European Union, known as CETA. Then came the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, <a href="https://international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/cptpp-ptpgp/index.aspx?lang=eng">dubbed the TPP</a>. Most recently there was the sticky renegotiation of NAFTA, resulting in the new United States-Mexico-Canada Agreement, <a href="https://international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/usmca-aeumc/index.aspx?lang=eng">or the USMCA.</a> </p>
<p>Every farmer in Canada rides the waves of these negotiations. Concessions and deals are cut in faraway urban environments, sometimes with little input from the rural communities that depend on agriculture for cultural and physical survival.</p>
<h2>Day kicks off in darkness</h2>
<p>I’ve worked with the agricultural industry for more than 20 years, in at least four different countries. But until this past Thanksgiving weekend at Lellavan Farms, I didn’t really know what it was to be a dairy farmer, to stomp a mile in their muddy boots, kicking my day off in the darkness at 4:30 a.m.</p>
<p>As we worked our way through the various chores, I chatted with Jeannie about her job, her farm and what these trade agreements mean to her. The three aforementioned agreements have collectively given other countries access to more than nine per cent of the Canadian milk market.</p>
<p>That is more milk than is produced in all of Atlantic Canada. Van Dyk shared with me a <a href="https://www.agropur.com/sites/default/files/documents/Analysis_of_%20impacts_of_supply_management_Canadian_dairy_inudstry-EN.pdf">report commissioned by Agropur Dairy co-operative</a>, whose members are spread across five Canadian provinces, called <em>Analysis of the potential impacts of the end of supply management in the Canadian dairy industry.</em> </p>
<p>It says opening up the Canadian dairy system risks a net loss of $2.1 to $3.5 billion of Canada’s GDP. Approximately 24,000 direct jobs would be affected.</p>
<h2>A spike followed by a decline</h2>
<p>Other studies suggest that countries that have transitioned away from supply management, such as Australia, have seen an initial spike in dairy production, <a href="http://www.momagri.org/UK/focus-on-issues/A-glimpse-of-the-world-abolition-of-supply-management-in-Australia_1667.html">then a steady reduction in production,</a> farms and farmers. Many producers have been <a href="http://www.agrifoodecon.ca/uploads/userfiles/files/dairy%20policy%20reform-cautionary%20july-18.pdf">forced to exit the industry</a> due to soft market conditions.</p>
<p>Van Dyk tells me that she writes 50 business cheques each month to local companies, a substantial contribution to the local economy. Her farm employs people from the community and hosts a student each summer, so future farmers have applied knowledge.</p>
<p>Being a dairy farmer is more than a job. It’s a way of life. The recent concessions in trade agreements are eroding farmers’ livelihoods, and thus that way of life.</p>
<p>Granted, it’s a challenging life. I often ask farmers why they do it.</p>
<h2>Love of their animals</h2>
<p>The answer is always the same: Love. Canadian dairy farms are not just milk factories. They are collections of people who love what they do and the animals in their care. That gets them through 20-hour days in the summer.</p>
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<img alt="" src="https://images.theconversation.com/files/242528/original/file-20181026-7071-pjvba9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/242528/original/file-20181026-7071-pjvba9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=459&fit=crop&dpr=1 600w, https://images.theconversation.com/files/242528/original/file-20181026-7071-pjvba9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=459&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/242528/original/file-20181026-7071-pjvba9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=459&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/242528/original/file-20181026-7071-pjvba9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=577&fit=crop&dpr=1 754w, https://images.theconversation.com/files/242528/original/file-20181026-7071-pjvba9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=577&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/242528/original/file-20181026-7071-pjvba9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=577&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Canada’s dairy farmers care about their livestock. In this 2016 photo, Andy Benson poses with a calf he saved a month earlier by performing CPR on his dairy farm in Bellisle Creek, N.B.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Ron Ward</span></span>
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<p>Jeannie and her husband John are proudly mentoring their two sons into the management of the 600-acre crop and 300-head farm. They all showed me how incredibly innovative farmers are as well as their dedication to the welfare and comfort of their animals. </p>
<p>Lellavan Farms just installed a $2.2-million dairy barn designed around the principal criteria of animal welfare, comfort and safety. Jeannie knows every single animal. As we walked around and interacted with them, it was clear they knew her. They showed affection.</p>
<p>In the language of reports, the Agropur report states that the dairy industry “contributes to the regional fabric and territory occupations.”</p>
<p>I’ll put it this way: You cannot separate farming from the fabric of rural Canada. The families, animals and land are fully integrated into the community and landscape. The survival of rural Atlantic Canada, in particular, is dependent on this, and it is something we must keep in mind during all of our trade negotiations.</p>
<p>Agriculture is our future; it’s that simple.</p><img src="https://counter.theconversation.com/content/105774/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Gray does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Countries that have phased out supply management systems in the dairy industry have seen an initial spike in production, then a steady decline. That’s why Canada should protect its dairy farmers.David Gray, Dean of the Faculty of Agriculture, Dalhousie UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1048142018-10-21T13:02:53Z2018-10-21T13:02:53ZHow the new USMCA strengthens Canada in future trade deals<figure><img src="https://images.theconversation.com/files/241349/original/file-20181018-67161-103q0oz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Prime Minister Justin Trudeau and Minister of Foreign Affairs Chrystia Freeland hold a news conference on the United States Mexico Canada Agreement (USMCA) in Ottawa on Oct. 1, 2018. THE CANADIAN PRESS/Justin Tang</span> <span class="attribution"><span class="source">THE CANADIAN PRESS/Justin Tang</span></span></figcaption></figure><p>Now that the threat of the <a href="https://www.macleans.ca/news/canada/how-nafta-was-saved-the-bitter-fight-and-last-minute-recovery/">NAFTA-pocalypse has lifted for Canada</a>, the Monday morning quarter-backing is well under way on whether the new United States-Mexico-Canada (USMCA) Agreement is better or worse than trade pact that preceded it. </p>
<p>But beyond the negative headlines, the USMCA probably leaves Canada stronger than it was going into the negotiations when it comes to future trade negotiations.</p>
<p>Three components of the deal, however — those surrounding dairy, the <a href="https://www.theglobeandmail.com/opinion/article-the-china-clause-in-usmca-is-american-posturing-but-its-no-veto/">non-market economy clause</a> and the new sunset provision — are worth reviewing for how they change Canadian trade politics both domestically and globally.</p>
<h2>Dairy</h2>
<p>Canadian dairy farmers have long been largely untouchable politically. That may now be changing, and they should expect to have their market access further eroded in future trade agreements.</p>
<p>In the short run, U.S. President Donald Trump was probably the best thing that ever happened to them. His disdain for Canadian dairy caused Canada to close ranks to support supply management even though it was already under intense scrutiny domestically as well. </p>
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<strong>
Read more:
<a href="https://theconversation.com/in-trade-war-with-trump-canada-should-stop-defending-the-indefensible-on-dairy-products-98127">In trade war with Trump, Canada should stop defending the indefensible on dairy products</a>
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<p>A important turning point came with a seminal <a href="https://www.policyschool.ca/wp-content/uploads/2016/03/supply-management-hall-findlay.pdf">2012 research paper</a>. In the report, author Martha Hall Findlay argued that the 1970s version of supply management was outdated, unjustified, was enriching dairy farmers on the backs of middle-class and low-income consumers and interfering with our trade agenda.</p>
<p>When Trump demanded dairy concessions, it not only solidified but calcified support among politicians for a system in Canada that was otherwise losing ground. Nonetheless he probably only delayed the inevitable.</p>
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<img alt="" src="https://images.theconversation.com/files/241059/original/file-20181017-41147-1txohfl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/241059/original/file-20181017-41147-1txohfl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=408&fit=crop&dpr=1 600w, https://images.theconversation.com/files/241059/original/file-20181017-41147-1txohfl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=408&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/241059/original/file-20181017-41147-1txohfl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=408&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/241059/original/file-20181017-41147-1txohfl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=513&fit=crop&dpr=1 754w, https://images.theconversation.com/files/241059/original/file-20181017-41147-1txohfl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=513&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/241059/original/file-20181017-41147-1txohfl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=513&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Cows check out visitors on a dairy farm in Saint-Henri-de-Taillon, Québec, in September 2018.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Jacques Boissinot</span></span>
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<p>The number of dairy farmers actually in the system is down about 90 per cent since supply management’s start in the early 1970s <a href="https://www.theglobeandmail.com/news/politics/canadas-dairy-industry-is-a-rich-closed-club/article25124114/">to around 11,500 from about 140,000 in the late 1960s and early 1970s,</a> and they have been a key irritant in nearly all of the country’s trade negotiations. </p>
<p>The political power of Canada’s dairy farmers rests on a crumbling consensus about the value of supply management. <a href="http://policyoptions.irpp.org/magazines/june-2018/public-ahead-of-politicians-on-dismantling-supply-management/">The Institute for Research on Public Policy recently found many Canadians supported </a> dismantling the system.</p>
<p>Nearly every other country has phased out similar supply management systems. With Canadian concessions in the Trans Pacific Partnership (TPP) with the Pacific rim, the Comprehensive Economic Trade Agreement with the European Union (CETA) and now the USMCA, it seems likely that supply management is something that will be increasingly bargained away.</p>
<p>Despite the promise of compensation from Ottawa, the industry needs to prepare now for long-term liberalization.</p>
<h2>Section 32.10</h2>
<p>Probably no section of the new agreement has raised as many eyebrows as Section 32. It compels each of the three parties to notify the others three months before they start trade negotiations with a country defined as having a “non-market” economy — namely, China. </p>
<p>A trade pact’s text must be disclosed within 30 days of signing it for review by the other two USMCA partners. If the other two countries don’t like it, they can kick that country out of the USMCA.</p>
<p>The provisions have been erroneously reported as giving the United States a veto over Canadian trade policy. It doesn’t (but don’t take my word for it, <a href="https://ustr.gov/sites/default/files/files/agreements/FTA/USMCA/32%20Exceptions%20and%20General%20Provisions.pdf">go ahead and read it</a>). </p>
<p>Further, given that under <a href="https://ustr.gov/sites/default/files/files/agreements/FTA/USMCA/34%20Final%20Provisions.pdf">Section 34.6</a>, the USMCA allows for withdrawal on six months’ notice from any country for any reason at all, the clause is more political than legal. Even without the China clause, if the U.S. doesn’t like Canadian trade policy, it can just leave the USMCA under 34.6. </p>
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<img alt="" src="https://images.theconversation.com/files/241058/original/file-20181017-41135-1ssyvdw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/241058/original/file-20181017-41135-1ssyvdw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/241058/original/file-20181017-41135-1ssyvdw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/241058/original/file-20181017-41135-1ssyvdw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/241058/original/file-20181017-41135-1ssyvdw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/241058/original/file-20181017-41135-1ssyvdw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/241058/original/file-20181017-41135-1ssyvdw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">In this November 2017 photo, President Donald Trump and Chinese President Xi Jinping shake hands during a joint statement to members of the media Great Hall of the People in Beijing, China.</span>
<span class="attribution"><span class="source">(AP Photo/Andrew Harnik)</span></span>
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<p>So who wins with this largely symbolic provision? Trump, for domestic reasons. The president can present this to his protectionist base as part of his wider trade war on China. This gives him a win as both the mid-term elections and 2020 loom.</p>
<p>But longer term, Section 32 may actually serve Mexico’s and Canada’s interests more than America’s. It symbolically ties the U.S. tightly to the USMCA by linking its global anti-China ambitions to the trade agreement. That’s not a bad thing for Canada from a trade perspective.</p>
<p>Why?</p>
<h2>‘Political cudgel’</h2>
<p>Presenting the USMCA to the world as a common front against China — the American intent with Section 32 — means abandoning the trade agreement is now more difficult for the United States. Any future threat to kill the agreement from Washington (and it won’t come from anywhere else) can now be framed by supporters of the USMCA as being weak on China.</p>
<p>That will likely reduce any chance it will be scrapped, which benefits Mexico and Canada.</p>
<p>The agreement comes up for its first mandatory review in six years to decide whether it should be extended. At that time, Section 32 provides a political cudgel to Ottawa and Mexico City to remind the United States that the USMCA helps to cement their global leadership against countries it views as strategic competitors. </p>
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<img alt="" src="https://images.theconversation.com/files/241065/original/file-20181017-41150-u31grb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/241065/original/file-20181017-41150-u31grb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=429&fit=crop&dpr=1 600w, https://images.theconversation.com/files/241065/original/file-20181017-41150-u31grb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=429&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/241065/original/file-20181017-41150-u31grb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=429&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/241065/original/file-20181017-41150-u31grb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=539&fit=crop&dpr=1 754w, https://images.theconversation.com/files/241065/original/file-20181017-41150-u31grb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=539&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/241065/original/file-20181017-41150-u31grb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=539&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Prime Minister Justin Trudeau and Minister of Foreign Affairs Chrystia Freeland are seen on Parliament Hill following a news conference on the USMCA trade deal on Oct. 1, 2018.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Justin Tang</span></span>
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<p>There was no similar provision in NAFTA, but if there was, there’s no doubt it would have helped us at the bargaining table.</p>
<p>Does this risk our relationship with China? Not likely. Remember, we’re nowhere near a trade agreement with China anyway given very different perspectives on environment and labour standards. </p>
<p>But that doesn’t mean there <a href="https://www.ppforum.ca/wp-content/uploads/2018/10/DiversificationNotDependence-PPF-OCT2018-EN-6.pdf">aren’t options</a>, and Canada has every right to pursue an agreement if we want. Mexico has already told China that <a href="https://www.scmp.com/news/china/diplomacy/article/2168493/mexico-seeks-assure-china-new-us-trade-deal-wont-block-other">it doesn’t see the USMCA as hindering any future agreements</a>. Canada can and should do the same.</p>
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Read more:
<a href="https://theconversation.com/beyond-nafta-canada-must-find-new-global-markets-98430">Beyond NAFTA: Canada must find new global markets</a>
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<p>Canada can also use the USMCA to its advantage with China — a country many times its size. While NAFTA was in doubt, Canada was in a weaker position negotiating with China.</p>
<p>Now, by fully securing continental trade, Canada can leverage its more secure position at the bargaining table to more credibly insist on a deal that works for North America.</p>
<h2>Sunset clause</h2>
<p>The U.S. <a href="https://www.theguardian.com/us-news/2018/aug/25/nafta-trump-drops-sunset-clause-demand-mexico?CMP=twt_gu">walked back its insistence on a five-year sunset clause</a> on NAFTA. <a href="https://ustr.gov/sites/default/files/files/agreements/FTA/USMCA/34%20Final%20Provisions.pdf">Now, the USMCA technically expires </a> every 16 years, unless all parties commit to renewing it after the first six years. </p>
<p>Failure to do so will lead to an automatic expiry after 10 years, but with meetings held annually to work out the differences. The parties meet every six years otherwise to review the agreement.</p>
<p>Again, there is less here than meets the eye. The agreement can theoretically be terminated on six months’ notice anyway. But this process has some potential upsides for keeping the deal up to date.</p>
<h2>Overhaul was long overdue</h2>
<p>Drama aside, there was nothing wrong with updating NAFTA. It was time; the agreement was 24 years old and included nothing on topics like the digital economy. Yet there was scant motivation by its three members to overhaul it.</p>
<p>We shouldn’t wait for a crisis to break out every quarter century to review our most important trade agreement. The technical expiry dates of the USMCA can and should be used to make regular changes that will keep the agreement fresh and remind all three countries of its importance to their economies. </p>
<p>That means we may end up with a better, more flexible USMCA.</p>
<p>To summarize, the USMCA, while imperfect, is overall a positive development for Canada. It has a number of structural elements that may very well leave us stronger when negotiating trade pacts in the future.</p><img src="https://counter.theconversation.com/content/104814/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andrew McDougall does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The USMCA, while imperfect, is overall a positive development for Canada. It has a number of structural elements that may very well leave us stronger when negotiating trade pacts in the future.Andrew McDougall, Sessional Lecturer, University of TorontoLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1029742018-09-11T21:39:08Z2018-09-11T21:39:08ZHow the dairy lobby’s cash grab put Canada in Trump’s crosshairs<figure><img src="https://images.theconversation.com/files/235822/original/file-20180911-144473-1ngrgw0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">In this April 2017 photo, Wisconsin dairy farmer Tim Prosser is seen with his cows. Canada's tough stance on diafiltered milk via its supply-management system has caused hardship for farmers like Prosser, forced to consider selling their milking cows and shutting down family businesses. </span> <span class="attribution"><span class="source">(AP Photo/Cara Lombardo)</span></span></figcaption></figure><p>Remember the early days of the NAFTA renegotiations, when all Donald Trump wanted to do was <a href="https://www.theglobeandmail.com/news/politics/trudeau-trump-sit-down-in-oval-office-for-first-face-to-face-meeting/article33998164/">“tweak”</a> the agreement as far as Canada was concerned? </p>
<p>That seems like a century ago now. A lot has happened to poison the well between then and now, including the U.S. president’s <a href="https://www.thestar.com/news/world/2018/06/12/we-just-shook-hands-trump-confused-by-trudeaus-pushed-around-comment-after-g7-summit.html">over-the-top reaction</a> to Prime Minister Justin Trudeau’s comments after the G7 Summit in Charlevoix, but one of the biggest obstacles has been the rise to prominence of Canada’s dairy supply management system.</p>
<p>Trump may not have a sophisticated understanding of international trade, but he understands numbers and politics. </p>
<p>When a small group of Wisconsin farmers pointed out that the nice little export niche they had carved out selling <a href="https://www.dairyfarmers.ca/farmers-voice/dairy-products/what-is-diafiltered-milk">diafiltered milk protein</a> to Canadian food processors had been shut down, and that Canada maintained tariffs of up to 300 per cent to prevent access to its dairy market, “The Donald” got the message. </p>
<p>After all, Wisconsin was a swing state that he was not expected to win during the 2016 U.S. presidential election. And “300 per cent tariffs” makes a great sound bite.</p>
<p>And now, with Foreign Affairs Minister Chrystia Freeland <a href="https://www.cp24.com/news/freeland-to-head-back-to-washington-for-high-level-nafta-negotiations-1.4088684">back in Washington to resume NAFTA renegotiations</a>, the key to success is spelled <a href="https://www.huffingtonpost.ca/2018/09/07/larry-kudlow-nafta-canada_a_23520365">M-I-L-K</a>, according to a top Trump economic official. </p>
<h2>Dairy farmers demonstrate</h2>
<p>Meanwhile, Canada’s dairy farmers have been up to their usual antics, demonstrating in Montréal and demanding “<a href="https://ipolitics.ca/2018/09/06/dairy-farmers-protest-as-nafta-talks-continue/">absolutely no concessions</a>.”</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1038064415466246144"}"></div></p>
<p>With a Québec election underway, it would be a brave Québec politician to call their bluff. Look what happened when Maxime Bernier stuck to his principles. It cost him the leadership of the Conservative Party, which instead went to <a href="https://www.theglobeandmail.com/opinion/editorials/article-globe-editorial-andrew-scheers-cheesy-trade-war-politics/">milk-slurping</a> Andrew Scheer.</p>
<p>How did we get into this box? </p>
<p>Supply management has been around for decades, since the early 1970s. Introduced as a means to ensure stable markets by controlling supply, it is built on a system of quotas that allows quota-holders (licensed dairy producers) to produce a set quantity of milk. </p>
<p>The price for that milk at the wholesale level is set by provincial boards. The price of raw milk will drive the cost of all other dairy products from butter to ice cream, cheese and yogurt. The result has been a price structure that has rewarded dairy quota-holders handsomely but has meant expensive dairy products for consumers.</p>
<p>The annual cost to consumers of inflated dairy is in the <a href="https://nationalpost.com/news/politics/supply-management-costs-poor-families-five-times-more-relative-to-household-income-study">hundreds of dollars per family</a>, affecting poorer families disproportionally. And it’s all designed to prop up a system that has made, according to Statistics Canada, Canada’s 11,000 dairy farmers <a href="https://www.thestar.com/opinion/contributors/thebigdebate/2018/07/10/should-canada-scrap-its-supply-management-system-yes.html">on average worth over $5 million each</a>. </p>
<h2>Barriers erected</h2>
<p>To maintain the artificial, walled garden of the Canadian dairy market and the “made-in-Canada” prices, barriers have been erected to keep out more competitively priced dairy products from other countries. </p>
<p>Diafiltered milk — milk that has been filtered through a membrane to concentrate it and raise its protein content — is the biggest issue for the United States. </p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/235873/original/file-20180911-144470-1o8u1dx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/235873/original/file-20180911-144470-1o8u1dx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=884&fit=crop&dpr=1 600w, https://images.theconversation.com/files/235873/original/file-20180911-144470-1o8u1dx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=884&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/235873/original/file-20180911-144470-1o8u1dx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=884&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/235873/original/file-20180911-144470-1o8u1dx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1111&fit=crop&dpr=1 754w, https://images.theconversation.com/files/235873/original/file-20180911-144470-1o8u1dx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1111&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/235873/original/file-20180911-144470-1o8u1dx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1111&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Former prime minister Brian Mulroney signs the North American Free Trade Agreement during a signing ceremony in Ottawa in 1992 as Michael Wilson, the international trade minister, looks on.</span>
<span class="attribution"><span class="source">(THE CANADIAN PRESS/Frank Gunn)</span></span>
</figcaption>
</figure>
<p>The product did not exist when NAFTA was first negotiated in the 1990s, so it was not included on the list of blocked items that Canada negotiated as part of its protection of supply management in the original agreement. It was a new product developed in the U.S. and sold into Canada at the lower American price, since it was classified as a protein ingredient and avoided NAFTA dairy tariffs.</p>
<p>Wisconsin dairy producers invested in plants to produce diafiltered milk for the Canadian market. It proved to be popular with Canadian food processors — even farmer-owned dairy co-ops — because it lowered their costs.</p>
<p>The market for the product gave the U.S. a <a href="https://business.financialpost.com/pmn/business-pmn/ap-fact-check-trump-partly-right-on-canad">surplus in dairy trade</a> with Canada of $475 million in 2017. </p>
<h2>A crack in the armour</h2>
<p>The arrangement seemed to be working well until the Canadian dairy industry in 2016 decided that the sale of diafiltered milk protein was a crack in the armour of supply management and had to be fixed. </p>
<p>Failing previously to get the product reclassified as milk, they established a new category of milk product in Canada under the supply management system, called Class 7, that would be sold (to Canadian processors) at the lower world price rather than the “made-in-Canada” price that consumers pay.</p>
<p>This effectively shut the door on the market for U.S. diafiltered milk exports. But that wasn’t all.</p>
<p>Because of the nature of the dairy industry, as demand for butterfat (butter, cream) goes up, so does the production of unwanted skim milk, the byproduct of butterfat production. </p>
<figure class="align-left ">
<img alt="" src="https://images.theconversation.com/files/235869/original/file-20180911-144470-zmt3u0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/235869/original/file-20180911-144470-zmt3u0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/235869/original/file-20180911-144470-zmt3u0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/235869/original/file-20180911-144470-zmt3u0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/235869/original/file-20180911-144470-zmt3u0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/235869/original/file-20180911-144470-zmt3u0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/235869/original/file-20180911-144470-zmt3u0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">As the demand increases for dairy products containing butterfat, including cheese and yogurt, there’s a glut of skim milk.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
</figcaption>
</figure>
<p>After many years of flat-lining, butterfat demand in Canada is going up. Since foreign producers are not allowed to help meet that demand, Canadian production of milk has increased, leading in turn to a surplus of skim milk. </p>
<p>Some of that surplus is turned into diafiltered milk protein and sold in Canada. The rest is sold on the world market at discounted prices. The alternative is to simply pour it down the drain, an outcome that is a regular occurrence under supply management as the system struggles to match supply and demand.</p>
<h2>An over-abundance of milk</h2>
<p>Since there is a glut of milk on the world market, these sales often displace U.S. exporters. American producers complain that the Canadian exports are the result of a closed system that subsidizes the production of a dumped product. Their argument is that you can’t have a closed market restricting imports while at the same time depressing world prices for others by <a href="https://www.cbc.ca/news/canada/prince-edward-island/pei-agriculture-secretary-sonny-perdue-supply-management-1.4707463">dumping milk solids</a> into export markets.</p>
<p>Canada’s supply management system would likely have flown under the radar in the NAFTA talks, but for the determination of the Canadian dairy lobby to close the door to the import of diafiltered milk protein. Because of this money grab, milk has become the bee in Donald Trump’s bonnet, and Canada and the rest of the Canadian economy is now a prime Trump target. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/in-trade-war-with-trump-canada-should-stop-defending-the-indefensible-on-dairy-products-98127">In trade war with Trump, Canada should stop defending the indefensible on dairy products</a>
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</em>
</p>
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<p>It’s ironic that the government will almost certainly have to give on Class 7 milk if it’s to ink a deal with the U.S. </p>
<p>A deal on diafiltered milk protein will allow the Trudeau government to claim that it protected the essence of supply management, but at least the system will be further eroded. No doubt the industry will be bought off with “adjustment payments.” </p>
<p>One way or the other we we all have to pay. However, I would rather pay as a taxpayer to wean Canada off supply management than pay through punitive U.S. trade actions against other sectors of the economy in order to retain a system that has long outlived its usefulness.</p><img src="https://counter.theconversation.com/content/102974/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Hugh Stephens is affiliated with School of Public Policy, University of Calgary as Executive Fellow</span></em></p>Canadian dairy farmers were already well-heeled and well-protected from world market forces, but their cash grab over something called diafiltered milk has put the entire Canadian economy at risk.Hugh Stephens, Executive Fellow, School of Public Policy, University of Calgary; Fellow, Canadian Global Affairs Institute; Associate Faculty, School of Business, Royal Roads University, University of CalgaryLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1025452018-09-03T13:52:39Z2018-09-03T13:52:39ZThe two key issues on the table to bring Canada back into NAFTA<figure><img src="https://images.theconversation.com/files/234551/original/file-20180902-195310-xrf0ys.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Improved access to Canada's dairy market for American producers is one of the key unresolved NAFTA issues.</span> <span class="attribution"><span class="source">THE CANADIAN PRESS/Darryl Dyck</span></span></figcaption></figure><p>Negotiations for a revised North American Free Trade Agreement have been ongoing for more than a year, but now it’s crunch time — especially for Canada.</p>
<p>What happens in the coming days will determine if NAFTA survives as a three-country trade pact or whether Canada will be left on the sidelines.</p>
<p>Since U.S. President Donald Trump announced <a href="https://www.cbc.ca/news/politics/nafta-us-mexico-progress-monday-1.4800182">the United States had a deal with Mexico that could replace NAFTA</a>, Canadian negotiators have been putting on a brave face publicly. Foreign Affairs Minister Chrystia Freeland <a href="https://www.cbc.ca/news/politics/nafta-trump-compromise-trudeau-1.4806240">was optimisitc</a> when talks took a break before the Labour Day weekend and <a href="https://www.huffingtonpost.ca/2018/08/29/trudeau-nafta-deal_a_23512048/">Prime Minister Justin Trudeau has said</a> “no NAFTA deal is better than a bad NAFTA deal.”</p>
<p>Trump, for his part, took to Twitter to keep up the pressure on Canada.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1035905988682018816"}"></div></p>
<p>There are two significant issues still on the table: How to resolve inevitable trade disputes and Canada’s policies that protect its dairy industry from foreign competition.</p>
<h2>How will disputes be resolved?</h2>
<p>The first sticking point is the existing <a href="https://www.nafta-sec-alena.org/Home/Dispute-Settlement/Overview-of-the-Dispute-Settlement-Provisions">dispute settlement mechanism</a> — particularly relative to <a href="https://www.cbsa-asfc.gc.ca/sima-lmsi/menu-eng.html">anti-dumping or countervailing duties</a>. This is known as Chapter 19 in the current NAFTA pact.</p>
<p>Currently, each government can review the actions of others and make a determination of whether trade action against a sector is warranted. These determinations can be appealed to the relevant court in each country.</p>
<p>If the dispute is not resolved, it can be appealed to the <a href="http://www.international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/nafta-alena/fta-ale/celeb2.aspx?lang=eng">NAFTA Free Trade Commission</a> and further to a bilateral panel to arbitrate the dispute. The panellists (two from each country and an alternating chair) are appointed by the disputants. The decisions of these panels are binding. It is this last provision that apparently is <a href="https://cuellar.house.gov/uploadedfiles/draft_nafta_notification_3.29.17.pdf">the sticking point for U.S. negotiators</a>.</p>
<p>It is worth noting this aversion to dispute resolution is not specific to the Trump administration. When the original Canada-U.S. free trade agreement was negotiated 30 years ago, Brian Mulroney’s Conservative government also threatened to <a href="https://www.cba.org/Publications-Resources/CBA-Practice-Link/Business-and-Corporate/2017/Chapter-19-again">walk away without a deal over the issue on how to resolve disputes</a>. In 1988, U.S. negotiators only conceded at the 11th hour.</p>
<h2>Leave it to the courts</h2>
<p>The United States believes domestic court systems should be able to effectively determine the legality of specific actions and, as such, these panels are an affront to national sovereignty. Canada feels Chapter 19 is an essential element to ensure the fair implementation of freer trade.</p>
<p>Those who believe the panels are not necessary or effective point to the fact that Canada has won several findings in the <a href="https://www.cigionline.org/articles/lumber-fuels-us-effort-axe-resolution-panels">softwood lumber dispute</a> without actually getting a positive resolution. Past U.S. administrations have also ignored panel findings and forced the Canadians to strike compromise deals or face continued countervailing duties. The U.S. lumber industry remains one of the most vocal opponents of these dispute settlement panels. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/beyond-nafta-canada-must-find-new-global-markets-98430">Beyond NAFTA: Canada must find new global markets</a>
</strong>
</em>
</p>
<hr>
<p>But others in all three countries argue the panels are an <a href="https://theconversation.com/the-big-challenge-of-the-nafta-renegotiations-dispute-settlement-82394">essential protection</a> despite not being frequently used in the past 10 years. There is little sign of bias because these panel findings are frequently unanimous.</p>
<p>In the end, there will be a mechanism to resolve disputes. Canada will have to decide whether retaining the panels is worth not making a deal. The U.S. will have to decide how far it wants to go on making concessions, balancing its desire for more sovereignty with the political reality of striking a deal that Congress will approve — a critical step in the final implementation of any new agreement.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/234552/original/file-20180902-195307-i2lvp0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/234552/original/file-20180902-195307-i2lvp0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=424&fit=crop&dpr=1 600w, https://images.theconversation.com/files/234552/original/file-20180902-195307-i2lvp0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=424&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/234552/original/file-20180902-195307-i2lvp0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=424&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/234552/original/file-20180902-195307-i2lvp0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=533&fit=crop&dpr=1 754w, https://images.theconversation.com/files/234552/original/file-20180902-195307-i2lvp0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=533&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/234552/original/file-20180902-195307-i2lvp0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=533&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Canada’s Foreign Affairs Minister Chrystia Freeland speaks during a news conference at the Canadian embassy after talks at the Office of the United States Trade Representative in Washington, D.C., on Aug. 31, 2018.</span>
<span class="attribution"><span class="source">(AP Photo/Jose Luis Magana)</span></span>
</figcaption>
</figure>
<h2>Canada’s dairy policies a major issue</h2>
<p>Canada’s supply management system uses quotas supported by tariffs to stabilize its dairy markets. Many countries have support programs for agriculture generally and the dairy market specifically.</p>
<p>While there is some criticism within Canada of supply management — most notably <a href="https://www.theglobeandmail.com/politics/article-maxime-bernier-quits-to-launch-new-party-criticizes-morally-corrupt/">Maxime Bernier’s split from the Conservatives</a> — there is <a href="https://nationalpost.com/news/politics/after-supply-management-cut-from-debate-at-conservative-convention-some-members-ponder-backing-bernier">strong support among both the Liberal government and the opposition Conservatives</a> for protecting the dairy industry.</p>
<p>Access to the Canadian dairy market has been somewhat of an irritant in past trade negotiations.</p>
<p>From the beginning, supply-managed commodities were protected by tariffs, but some product has been allowed in (based on historical import shares) using import quotas. Products coming in under these import quotas are not subject to the high tariffs. The U.S. also uses <a href="https://www.brookings.edu/blog/up-front/2018/06/13/a-trumped-up-charge-against-canadian-dairy-tariffs/">import quotas and high tariffs to protect its dairy</a> and other industries.</p>
<h2>Canada has opened access for others</h2>
<p>As part of other new trade agreements, Canada has provided additional access (through import quotas) to the market.</p>
<p>The Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union provided for additional access for European dairy products. The Trans Pacific Partnership (TPP) agreement also had provisions for additional market access — including the U.S. market, until the Trump administration withdrew from TPP.</p>
<p>Dairy became a specific irritant early in the Trump administration.</p>
<p>Shifting demand for milk components meant surpluses for milk protein, used to create a product called <a href="https://www.agweb.com/article/why-canadian-producers-arent-happy-with-imports-of-us-milk-proteins-naa-fran-howard/">diafiltered milk</a>. Because it’s a new product, U.S. diafiltered milk is not covered under previous trade agreements. This meant it could come in to Canadian processors, particularly cheese manufacturers, tariff-free. </p>
<p>In retaliation, Canadian milk protein producers first lobbied the government for protection and when none was forthcoming, changed pricing to protect their market. That in turn caused disruption in some U.S. markets — particularly in Wisconsin, an important state for Trump politically.</p>
<p>Even with the decreased volume in diafiltered milk, the U.S. still has <a href="https://www.washingtonpost.com/news/politics/wp/2018/06/11/what-u-s-trade-with-canada-actually-looks-like/?noredirect=on&utm_term=.4548a798aeef">an export surplus with Canada in dairy products</a>. Regardless, it appears that this issue is a particular irritant for Trump.</p>
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<h2>Over-production, low prices</h2>
<p>The U.S. dairy industry, like many others around the world, is struggling with over-production and low prices. The U.S. also has a number of programs in place to support the dairy industry, which would need to be taken into consideration in any NAFTA negotiations around dairy trade.</p>
<p>The irony is the structure of some of the U.S. dairy support programs may actually be contributing to the over-production — surplus products are bought to support prices, which sends a signal to keep producing too much. </p>
<p>Completely open trade with Canada will not solve the issues facing the U.S. dairy industry, not least because the Canadian market is much smaller than the U.S. domestic market.</p>
<p>In the end, Canada is unlikely to yield on supply management. If a concession is made, it is likely to be in increased access. Canada had already provided an increase in access in the TPP negotiations.</p>
<p>This would seem to be an area of potential concession that would provide Trump with a “win” for farmers and allow the Canadians to sustain their domestic program. It would not be without pain for the Canadian industry, but may be the path to an agreement.</p>
<p>The final chapter of these lengthy NAFTA talks will come down to one key point: Is compromise possible?</p><img src="https://counter.theconversation.com/content/102545/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michael von Massow does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Canada and the United States are back at the table to try to save NAFTA negotiations. Two key issues need to be resolved.Michael von Massow, Associate Professor, Food Economics, University of GuelphLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1023272018-08-28T21:18:54Z2018-08-28T21:18:54ZNAFTA negotiations: Two’s company, three’s a crowd?<figure><img src="https://images.theconversation.com/files/233978/original/file-20180828-86132-1ijundj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The national flags of Canada, from left, the U.S. and Mexico, are lit by stage lights before a news conference at the start of North American Free Trade Agreement renegotiations in Washington. But Canada's status is now unsure after the U.S. and Mexico announced progress on a bilateral deal.</span> <span class="attribution"><span class="source">AP Photo/Jacquelyn Martin</span></span></figcaption></figure><p>Two’s company, three’s a crowd. The third wheel. There’s no good term for someone who jams a couple, seemingly invited in out of pity.</p>
<p>Is that the position Canada finds itself in with the United States and Mexico, <a href="https://www.cbc.ca/news/politics/tasker-freeland-nafta-talks-trump-1.4801706">brought back in to the negotiations</a> to conclude a new continental trade pact at the 11th hour after Washington and Mexico City have made a deal of their own?</p>
<p>And, if so, how did it get to the point that the United States’ most important trading partner appears to be essentially an afterthought in talks fundamental to Canadian national interests?</p>
<p>The Trudeau government said for weeks that Ottawa wasn’t frozen out of the negotiations. It was normal for two parties in a three-way negotiation to huddle and work on issues fundamental to them alone, Ottawa said.</p>
<h2>Fundamental issues</h2>
<p>But the U.S.-Mexico agreement initialed this week didn’t deal solely with bilateral issues, but with issues fundamental to Canada too, such as the <a href="https://www.nafta-sec-alena.org/Home/Dispute-Settlement/Overview-of-the-Dispute-Settlement-Provisions">dispute-resolution mechanism </a>that was Canada’s most important trade objective when Ottawa first signed a free-trade pact with the United States in 1987.</p>
<p>If anyone traditionally worried about being the third wheel in the North American relationship, it was Mexico.</p>
<p>Mexico was only invited to negotiate its way into the free-trade zone after Canada and the United States had done their deal and put it into effect. Once those trilateral negotiations began in 1991, the three parties were scrupulous in ensuring they remained three-way talks.</p>
<p>Certainly, there were issues that concerned Canada only, such as cultural protections. And there were issues that concerned Mexico only, such as protections for its energy industry. But Canada and Mexico maintained a common interest in engaging the United States. And Washington didn’t try a divide-and-conquer strategy, recognizing that NAFTA involved continent-building as much as trade facilitation.</p>
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<img alt="" src="https://images.theconversation.com/files/233979/original/file-20180828-86135-1zusv6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/233979/original/file-20180828-86135-1zusv6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=416&fit=crop&dpr=1 600w, https://images.theconversation.com/files/233979/original/file-20180828-86135-1zusv6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=416&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/233979/original/file-20180828-86135-1zusv6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=416&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/233979/original/file-20180828-86135-1zusv6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=523&fit=crop&dpr=1 754w, https://images.theconversation.com/files/233979/original/file-20180828-86135-1zusv6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=523&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/233979/original/file-20180828-86135-1zusv6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=523&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">U.S. Trade Representative Robert Lighthizer, left, and Mexican Secretary of Economy Idelfonso Guajardo, right, walk to the White House on Monday August 27, 2018. President Donald Trump says the prospects are ‘looking good’ for an agreement with Mexico that could set the stage for an overhaul of the North American Free Trade Agreement.</span>
<span class="attribution"><span class="source">(AP Photo/Luis Alonso Lugo)</span></span>
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<h2>Behind the eight ball</h2>
<p>Not so now. Canada now finds itself behind the eight ball in these negotiations, possibly faced with a choice between a bad deal and no deal at all, precisely what the Trudeau government was determined to avoid.</p>
<p>In particular, the price of signature may include a humiliating climb-down on protections for the supply-managed dairy and poultry sectors.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/in-trade-war-with-trump-canada-should-stop-defending-the-indefensible-on-dairy-products-98127">In trade war with Trump, Canada should stop defending the indefensible on dairy products</a>
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<p>Much of this is the fault of the Trump administration. The White House has been singular in its contempt for its trading partners and in its dismissal of any concept of a North American community.</p>
<p>Canada and the United States have fought over trade since before Canada was a country (the first dispute over softwood lumber trade dates to shortly after the American Revolution), but Ottawa and Washington always sought to make those disputes about those disputes alone.</p>
<p>U.S. President Donald Trump, in contrast, talks as if Canada’s dairy tariffs are symptomatic of Canada’s trading practices rather than the exception.</p>
<h2>Unrealistic expectations</h2>
<p>But Ottawa deserves plenty of blame too. The Trudeau administration went into the NAFTA talks with unrealistic expectations.</p>
<p>It’s demand for a progressive pact, worthy as that goal might have been, simply turned off the White House, just as it did the Chinese government in putative trade talks last year.</p>
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<img alt="" src="https://images.theconversation.com/files/233980/original/file-20180828-86120-1mmrykf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/233980/original/file-20180828-86120-1mmrykf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=414&fit=crop&dpr=1 600w, https://images.theconversation.com/files/233980/original/file-20180828-86120-1mmrykf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=414&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/233980/original/file-20180828-86120-1mmrykf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=414&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/233980/original/file-20180828-86120-1mmrykf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=520&fit=crop&dpr=1 754w, https://images.theconversation.com/files/233980/original/file-20180828-86120-1mmrykf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=520&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/233980/original/file-20180828-86120-1mmrykf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=520&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Canada’s Minister of Foreign Affairs Chrystia Freeland headed to Washington a day after the U.S. and Mexico announced progress on a bilateral trade deal.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Darryl Dyck</span></span>
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<p>More costly still was Ottawa’s determination to show no flexibility on <a href="https://www.cbc.ca/news/politics/canada-supply-management-explainer-1.4708341">supply management</a>. More than one prime minister over the past three decades has wished quietly for an opportunity to reform this protectionist throw-back, even as they mouthed fealties to it.</p>
<p>This negotiation was the opportunity to act but, instead of doing it proactively and strategically, the Trudeau government may be forced into it as the price of saving Canada’s most important trade pact. </p>
<p>It’s now widely accepted that Canada is too dependent on the U.S. market given the wave of protectionism washing over U.S. politics. But, if anything, it may be more accurate to say that Canada didn’t do enough to protect its North American advantage by building a community of interest and institutional ties in the United States.</p>
<p>Instead, Canada took the U.S. market — as big as the entire European Union and right on our doorstep — for granted.</p>
<p>The White House, having finally grabbed Ottawa’s attention, may now agree to a deal that Ottawa can live with. Or it may work to drive a very hard bargain with the clock ticking. If so, another European comparison comes to mind: Canada just might have been sleepwalking to its own Brexit.</p><img src="https://counter.theconversation.com/content/102327/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Drew Fagan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>An announcement that the United States and Mexico were close to a new trade deal came as a surprise to many. How did Canada become an afterthought during the NAFTA negotiations?Drew Fagan, Professor of Public Policy, Munk School of Global Affairs and Public Policy, University of TorontoLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1020892018-08-23T22:36:27Z2018-08-23T22:36:27ZMaxime Bernier’s bold move<figure><img src="https://images.theconversation.com/files/233350/original/file-20180823-149496-1w9hcyw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Maxime Bernier announces he will leave the Conservative party during a news conference in Ottawa on Aug. 23, 2018.</span> <span class="attribution"><span class="source">THE CANADIAN PRESS/Adrian Wyld</span></span></figcaption></figure><p>Maxime Bernier, the 2017 Conservative Party of Canada (CPC) leadership runner-up, has announced he’s leaving the party to form a truly conservative alternative to Andrew Scheer’s CPC, which Bernier categorized as “<a href="https://www.theglobeandmail.com/politics/article-maxime-bernier-to-make-announcement-ahead-of-conservative-convention/">intellectually and morally corrupt</a>”</p>
<p>While it’s been clear since the <a href="http://www.cpac.ca/en/conservative-leadership-results/">May leadership contest</a> that conflicts between Bernier and Scheer persisted — <a href="https://nationalpost.com/news/politics/scheer-drops-maxime-bernier-from-critic-position-after-book-chapter-on-supply-management-posted-online">with Bernier removed from the CPC shadow cabinet</a> for publicly challenging the party on supply management in Canada’s dairy sector — this move came as a surprise given that it coincided with the <a href="http://www.cpac.ca/en/cpac-in-focus/2018-conservative-convention/">start of the party’s policy convention</a>.</p>
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<a href="https://images.theconversation.com/files/233351/original/file-20180823-149493-1kse77t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/233351/original/file-20180823-149493-1kse77t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/233351/original/file-20180823-149493-1kse77t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=425&fit=crop&dpr=1 600w, https://images.theconversation.com/files/233351/original/file-20180823-149493-1kse77t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=425&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/233351/original/file-20180823-149493-1kse77t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=425&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/233351/original/file-20180823-149493-1kse77t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=535&fit=crop&dpr=1 754w, https://images.theconversation.com/files/233351/original/file-20180823-149493-1kse77t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=535&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/233351/original/file-20180823-149493-1kse77t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=535&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Happier times? Bernier congratulates Scheer after the former speaker was elected the new leader of the federal Conservative party in May 2017.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Frank Gunn</span></span>
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<p>Bernier made his move to maximize both media coverage and pressure on his former party, one he’s accused of “<a href="https://globalnews.ca/video/4405088/conservative-party-has-abandoned-conservatives-bernier-quits-cpc">abandoning</a>” Canadian conservatives. The question now is just how effective Bernier’s new party will be, and, if it can find success in time for the 2019 election, how will it affect the CPC and wider federal politics?</p>
<p>Bernier’s new party has potential, if for no other reason than he won more than 49 per cent support in the 2017 leadership contest, meaning that many Canadian conservatives are sympathetic to Bernier’s vision for Canada. </p>
<h2>Caucus support?</h2>
<p>But there’s no real sense if Bernier has support from key influencers in the CPC. Indeed, Bernier said in <a href="https://www.ctvnews.ca/politics/maxime-bernier-quits-conservative-party-to-start-new-one-1.4064855">his departure news conference</a> that he had not discussed his move with his caucus mates. This doesn’t mean failure is inevitable, but it may be that, however popular Bernier is with segments of the Conservative electorate, he won’t have the institutional muscle to launch a viable party, especially so quickly.</p>
<p>Furthermore, it’s not yet clear just what sort of platform Bernier will offer to Canadians. </p>
<p>In 2017, Conservatives looked to Bernier as the libertarian candidate who ostensibly fit the “fiscally conservative, socially liberal” archetype. During that campaign, when hopefuls like <a href="https://www.cbc.ca/news/politics/leitch-trost-obhrai-nominations-1.4455820">Kellie Leitch and Brad Trost</a> made staunch pitches to social conservatives, Bernier highlighted economic issues, namely limiting government intervention. </p>
<p>If this is the basis of his new party, he may well pull support from his leadership backers, as well as right-leaning Liberals who can’t stomach Conservative social policy. </p>
<p>Nonetheless in recent months, Bernier has merged his laissez-faire economics with an approach to cultural and social issues that aligns him much more explicitly with the far right <a href="https://www.vice.com/en_ca/article/nz5z3x/the-alt-right-has-eaten-the-conservative-leadership-race">than he did</a> during the 2017 contest. </p>
<p>Most recently and notably, he has become a <a href="https://www.theglobeandmail.com/politics/article-scheer-bernier-spat-over-identity-politics-comes-a-week-before/">high-profile critic of what he called the Liberal government’s “extreme” approach to multiculturalism</a> and diversity, which supposedly puts at risk the sanctity and meaning of Canadian identity. </p>
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<p>Bernier has intertwined this with his anti-government ideology, <a href="https://twitter.com/MaximeBernier/status/1028801989038231552">saying that the Liberal approach</a> to diversity creates little tribes that “become political clienteles to be bought with taxpayers $ and special privileges.”</p>
<h2>What will his platform be?</h2>
<p>In a sense, Bernier is keeping many of his libertarian policies while making an overture to those Canadians wary of diversity, immigration and multiculturalism. The question is: Can he convincingly combine these beliefs into a coherent policy suite that appeals to Canadians, or will he end up with a platform that pleases no one sufficiently to win any significant support? </p>
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<img alt="" src="https://images.theconversation.com/files/233352/original/file-20180823-149469-1dg1exd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/233352/original/file-20180823-149469-1dg1exd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=641&fit=crop&dpr=1 600w, https://images.theconversation.com/files/233352/original/file-20180823-149469-1dg1exd.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=641&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/233352/original/file-20180823-149469-1dg1exd.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=641&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/233352/original/file-20180823-149469-1dg1exd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=805&fit=crop&dpr=1 754w, https://images.theconversation.com/files/233352/original/file-20180823-149469-1dg1exd.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=805&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/233352/original/file-20180823-149469-1dg1exd.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=805&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Bernier’s move is likely a gift to Trudeau.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Darryl Dyck</span></span>
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<p>But with all this in mind, let’s say Bernier wins meaningful support in 2019. What will the potential impact be? </p>
<p>In short, the conventional narrative is that this is a boon to Justin Trudeau’s Liberals. Before this split, the <a href="https://www.cbc.ca/news/politics/poll-tracker-federal-poll-averages-and-seat-projections-1.4171977">CBC poll tracker</a> had the Liberals and Conservatives nearly tied in the popular vote, but with the Liberals’ vote efficiency putting them on the precipice of another majority government.</p>
<p>Even if Bernier’s new party wins just five per cent of the electorate in 2019, and a majority of that comes from current CPC voters, it will benefit the Liberals (as well as the New Democrats, to a lesser extent, in some regions where they run second to the CPC).</p>
<p>So if one identifies as an anything-but-Conservative voter, Bernier’s move could be welcome news. The risk, however, is that while a more stridently conservative party led by Bernier will feud with Scheer’s CPC, it may also incubate experimental right-wing ideas that could be eventually incorporated into the CPC’s platform. </p>
<h2>Poaching ideas</h2>
<p>Such a scenario would be reminiscent of when the New Democrats have championed progressive <a href="https://ottawacitizen.com/opinion/columnists/woodfinden-liberals-pharmacare-stance-aims-to-steal-ndp-votes-again">social and economic ideas like pharmacare </a> before they gained mainstream acceptance, but in so doing gave legitimacy to the ideas, which were then poached by the Liberals. </p>
<p>It isn’t inconceivable that Bernier’s new party could fuel attacks on things like Medicare and multiculturalism, which may allow the CPC to take up those ideas, even just partially, and appear as relatively moderate to the electorate in doing so.</p>
<p>Ultimately, we have no real sense of how Bernier’s plan will unfold, or if it will find even modest success. History tells us that the vast majority of political parties in Canada fail due to <a href="https://www.cbc.ca/news/politics/the-pros-and-cons-of-canada-s-first-past-the-post-electoral-system-1.3116754">our first-past-the-post system</a>. Indeed, only three federal parties have official party status right now; two with roots back to Confederation and one with roots in the Great Depression. </p>
<p>But don’t count Mad Max out. If politics has taught us anything over the past few years, it’s that the impossible is a lot more likely than we’ve previously thought.</p><img src="https://counter.theconversation.com/content/102089/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Christo Aivalis receives funding from the Social Sciences and Humanities Research Council.
Christo Aivalis is a member of the New Democratic Party of Canada</span></em></p>Maxime Bernier has announced he’s forming a new conservative party to challenge Andrew Scheer’s Conservatives. Don’t count him out. Politics has shown us recently that the impossible can happen.Christo Aivalis, SSHRC Postdoctoral Fellow, Department of History, University of TorontoLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/992802018-07-09T22:32:29Z2018-07-09T22:32:29ZThe measly $292.50 that could have transformed Canada’s agrifood sector<figure><img src="https://images.theconversation.com/files/226393/original/file-20180705-122247-agi4pj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A different decision from the Supreme Court of Canada on inter-provincial trade barriers could have, among other things, finally forced politicians to deal with the country's problematic supply management system for the dairy and poultry sectors.
</span> <span class="attribution"><span class="source">THE CANADIAN PRESS/Sean Kilpatrick</span></span></figcaption></figure><p>The Supreme Court of Canada’s <a href="https://www.cbc.ca/news/politics/scoc-decision-liquor-provinces-1.4625861">ruling earlier this year on interprovincial trade barriers</a> represents a significant loss for consumers and for the Canadian economy at a time it can least afford it. But it was a great win for inertia.</p>
<p>In 2012, Gérard Comeau bought 344 bottles of beer, two bottles of whisky and one bottle of other spirits in Quebec, which he then brought back home to New Brunswick. This is something he had done several times.</p>
<p>But it was, in fact, deemed illegal, <a href="https://constitutional.findlaw.ca/article/how-much-alcohol-can-i-bring-from-another-province/">based on a 90-year-old law</a>. <a href="https://nationalpost.com/news/canada/beer-battle-new-brunswick-man-files-constitutional-challenge-over-right-to-buy-cheap-alcohol-in-quebec">Comeau was eventually arrested and fined $292.50</a>. More than five years later, the Supreme Court ruled the fine was constitutional.</p>
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<figcaption><span class="caption">CBC News.</span></figcaption>
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<p>The Comeau case was never just about beer. It was essentially about enabling our domestic economy across the country to thrive. For the agrifood sector, the decision would have had tremendous significance had it gone the other way.</p>
<p>Who would have thought that $292.50 had the potential to forever stifle Canada’s domestic food trade?</p>
<p>For almost nine decades, interprovincial barriers have multiplied and made doing business stupidly difficult and expensive for many food companies. For consumers, if no one catches you, you move on. For businesses, when buying ingredients or specialty products from another province, it’s a major hassle.</p>
<p>What’s more, many of these products were taxed only to support provincial governments’ public coffers. Barriers were erected to suppress competition and to sell more taxed and overpriced food products and beverages.</p>
<h2>Plenty of Canadian trade barriers</h2>
<p>Canada has myriad trade barriers, in addition to the fact that the agrifood sector is addicted to marketing boards, whose countervailing powers appease entrepreneurial angst in the sector.</p>
<p>Those on the freer trade side of the equation were counting on the Supreme Court of Canada to put politicians on notice about the need to get our interprovincial act together and eliminate trade barriers. But it did not happen.</p>
<p>Because of the ruling, creative companies in smaller provinces won’t have a fighting chance to expand and compete in larger markets, such as Quebec and Ontario. Wineries, craft cheese producers, craft breweries, speciality meat producers and many other small-scale operations will face mounting obstacles domestically.</p>
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<img alt="" src="https://images.theconversation.com/files/226384/original/file-20180705-122256-1jcew9z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/226384/original/file-20180705-122256-1jcew9z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=442&fit=crop&dpr=1 600w, https://images.theconversation.com/files/226384/original/file-20180705-122256-1jcew9z.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=442&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/226384/original/file-20180705-122256-1jcew9z.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=442&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/226384/original/file-20180705-122256-1jcew9z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=555&fit=crop&dpr=1 754w, https://images.theconversation.com/files/226384/original/file-20180705-122256-1jcew9z.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=555&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/226384/original/file-20180705-122256-1jcew9z.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=555&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Vines are draped in mesh to keep the birds from eating grapes at Petite Rivière Vineyards in Crousetown, N.S. in October 2017. Wineries are among the businesses that deal with the headaches of interprovincial trade barriers.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Andrew Vaughan</span></span>
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<p>A different ruling could have also been the wake-up call our supply-managed sectors needed. But our provincially based quota system to support dairy, poultry and egg production facilities will escape unscathed, despite the trouble it’s causing in NAFTA renegotiations.</p>
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<strong>
Read more:
<a href="https://theconversation.com/in-trade-war-with-trump-canada-should-stop-defending-the-indefensible-on-dairy-products-98127">In trade war with Trump, Canada should stop defending the indefensible on dairy products</a>
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<p>As well, this could have been an opportunity to recalibrate some of the agrifood wealth around the country. </p>
<p>For example, dairy processing has historically <a href="http://www.dairyinfo.gc.ca/index_e.php?s1=dff-fcil&s2=farm-ferme&s3=nb">been concentrated in the province of Quebec.</a> Quotas are evenly distributed, based on domestic demand for milk, including processing. Now it’s unlikely we’ll see other provinces play a much larger role in dairy processing.</p>
<h2>‘Haves’ support the ‘have-nots’</h2>
<p>The Comeau ruling could have also injected some deeply needed supply-management reforms to make the regime more flexible and current. New methods capitalizing on <a href="https://www.cartv.gouv.qc.ca/en/questions-around-notion-terroir">terroir knowledge</a> could have been a huge boon to Canada’s gastronomic regions.</p>
<p>Right now, most food production is done in Ontario and Quebec. A different decision by the Supreme Court could have eliminated what many consider a weak and obsolete equalization system that sees the “have” provinces supporting the “have-nots.”</p>
<p>A different outcome could have also resulted in a reduction in the price of a variety of products we now enjoy. More competition would have put downward pressure on prices. Fiscal policies would have changed given how open provincial economies were going to become. </p>
<p>But now we’ll need to wait a while longer.</p>
<p>The will for more economic integration makes Canada’s internal trade barriers undesirable and unsustainable. The case for a better flow of goods remains very strong in Canada from an economic standpoint. </p>
<h2>Internal trade barriers make no sense</h2>
<p>Interprovincial trade barriers never made sense in the first place, and never will. </p>
<p>We are only 37 million inhabitants in one of the vastest countries in the world. Distribution costs are prohibitive for many of our small- and medium-sized companies, which often drive the open agrifood innovation agenda in Canada.</p>
<p>These companies have long needed just such a chance to thrive beyond one or a few provinces.</p>
<p>Some argued a different Comeau ruling could have triggered <a href="https://www.cbc.ca/news/canada/new-brunswick/supreme-court-gerard-comeau-new-brunswick-alcohol-rob-cunningham-1.4436382">a race to the bottom in terms of health standards and food safety.</a> </p>
<p>That’s nonsense. Risk management practices in the Canadian agrifood sector are exemplary. As we continue to seek opportunities abroad, Ottawa and the provinces need to clean house here first — and they do.</p>
<p>After 90 years, Ottawa was poised to finally receive a strong message that Canadians deserve better. But it was not to be. The Supreme Court has opted to stay on the sidelines.</p><img src="https://counter.theconversation.com/content/99280/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sylvain Charlebois does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The Gérard Comeau case was never just about beer. It was essentially about enabling Canada’s domestic economy across the country to thrive. Here’s how the Supreme Court of Canada got it so wrong.Sylvain Charlebois, Professor in Food Distribution and Policy, Dalhousie UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/981272018-06-11T22:15:36Z2018-06-11T22:15:36ZIn trade war with Trump, Canada should stop defending the indefensible on dairy products<figure><img src="https://images.theconversation.com/files/222648/original/file-20180611-191951-gb4drh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Diary farmer Chris Ryan and his cow Ninja take part in a protest on Canada's Parliament Hill in 2016. </span> <span class="attribution"><span class="source">THE CANADIAN PRESS/Justin Tang</span></span></figcaption></figure><p>Donald Trump is a bare-knuckled, sharp-elbowed negotiator who instinctively goes for his opponent’s weakness. In Canada’s case, this weakness is our hypocritical and self-defeating defence of supply management, particularly in the dairy sector.</p>
<p>When Trump ignores Canada’s long-standing partnership with the United States but <a href="https://globalnews.ca/news/4260429/trump-tweet-about-trudeau-tariffs/">brings world attention to the nearly 300 per cent tariffs imposed on foreign dairy products</a>, we know we have a problem.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1004871827406061573"}"></div></p>
<p>For years Canada’s trade negotiators have had to enter discussions with a millstone around their necks. While seeking market opening opportunities for Canadian exports, they had to block any access to Canada’s supply-managed sectors (dairy, chicken and eggs).</p>
<p>While all three forms of supply management are <a href="https://www.theglobeandmail.com/report-on-business/rob-commentary/canadas-supply-management-system-for-dairy-is-no-longer-defensible/article36029788/">economically and socially indefensible</a>, it is the dairy industry that has attracted the most attention and presents the greatest degree of market distortion.</p>
<p>Supply management controls production by assigning quotas to specific products and allocating them to individual producers. If a producer has not acquired a quota, it cannot sell the product on the Canadian market.</p>
<p>High external tariffs are required to keep out competing foreign products that might undercut the artificial “made in Canada” price that domestic consumers have to pay. </p>
<p>The limits on production, and the cost of quota, keep prices artificially high — to the benefit of authorized producers and at the cost of everyone else. The system was introduced in the 1970s as a way of avoiding sudden price fluctuations, but this form of legalized cartels has outlived its usefulness and has been abandoned by most other countries. </p>
<h2>Imposes costs</h2>
<p><a href="https://www.policyschool.ca/wp-content/uploads/2016/03/supply-management-hall-findlay.pdf">Repeated studies</a> have shown supply management imposes considerable costs on the Canadian economy and, in particular, on Canadian consumers.</p>
<p>As a result of this system, <a href="http://nationalpost.com/news/politics/supply-management-costs-poor-families-five-times-more-relative-to-household-income-study">each Canadian family is estimated</a> to subsidize some 9,000 millionaire dairy farmers (and other supply-managed sectors) to the tune of $450 annually. This is a regressive tax on lower income Canadians.</p>
<p>A <a href="https://www.policyschool.ca/wp-content/uploads/2018/03/NAFTA-Renegotiations-Beaulieu-final.pdf">new study</a> recently published by the University of Calgary titled <em>NAFTA Negotiations: An Opportunity for Canadian Dairy?</em> has convincingly argued that freeing the Canadian dairy industry from the shackles of supply management would introduce greater innovation and competitiveness into the sector and lead to significant economic benefits for both consumers and the industry, increasing consumption of dairy products and expanding production including exports.</p>
<p>Instead, the industry prefers to stay in the highly protected “walled garden” in which it has resided for the past 40 years.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/222653/original/file-20180611-191981-1xiskf4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/222653/original/file-20180611-191981-1xiskf4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=469&fit=crop&dpr=1 600w, https://images.theconversation.com/files/222653/original/file-20180611-191981-1xiskf4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=469&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/222653/original/file-20180611-191981-1xiskf4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=469&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/222653/original/file-20180611-191981-1xiskf4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=590&fit=crop&dpr=1 754w, https://images.theconversation.com/files/222653/original/file-20180611-191981-1xiskf4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=590&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/222653/original/file-20180611-191981-1xiskf4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=590&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Dairy farmers have been a powerful lobby group in Canada for decades. In this photo from 1976, Canadian Agriculture Minister Eugene Whelan is doused with milk during a protest for a dairy subsidy to compensate for low prices.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Russell Mant</span></span>
</figcaption>
</figure>
<h2>Considerable influence</h2>
<p>The power and influence of the dairy lobby on the Canadian political system should not be underestimated. Andrew Scheer may well smirk as he downs a carton of milk, tacitly acknowledging the role of the dairy lobby in defeating his main opponent for the leadership of the Conservative Party, Maxime Bernier.</p>
<p>Bernier is the only major political leader in Canada with the courage to take on this powerful interest group. None of the other leaders or parties are prepared to take the necessary decisions to bring this sector of the economy into the 21st century, requiring it to compete globally as do all the other industries, including such agri-food sectors as grains, pork and beef.</p>
<p>While the damage that supply management does to the broader economy and to the dairy industry itself is well documented (it is basically barred from developing export markets because of the closed Canadian market), what is becoming increasingly obvious is the damage that it is causing to overall Canadian trade interests by requiring our negotiators to defend the indefensible.</p>
<p>In having to fend off U.S. demands for access to the Canadian dairy market, our negotiators are foregoing other opportunities to deal with access barriers to the U.S. market.</p>
<h2>A bee in Trump’s bonnet</h2>
<p>Donald Trump may not be a details man, but when he latches on to a simple concept, he is like a dog with a bone. Wisconsin’s politically connected dairy farmers have got the message through to the White House that Canada imposes “unfair” barriers to the export of U.S. dairy products. No amount of recalling past warm friendships or shared economic interests is going to dislodge that particular bee in his bonnet.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/222666/original/file-20180611-191978-lmgrl5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/222666/original/file-20180611-191978-lmgrl5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=444&fit=crop&dpr=1 600w, https://images.theconversation.com/files/222666/original/file-20180611-191978-lmgrl5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=444&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/222666/original/file-20180611-191978-lmgrl5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=444&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/222666/original/file-20180611-191978-lmgrl5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=558&fit=crop&dpr=1 754w, https://images.theconversation.com/files/222666/original/file-20180611-191978-lmgrl5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=558&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/222666/original/file-20180611-191978-lmgrl5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=558&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Canada’s Prime Minister Justin Trudeau meets with U.S. President Donald Trump at the G7 leaders summit in La Malbaie, Que., on June 8 – two days before Trump criticized Trudeau and said the United States wouldn’t sign the G7 communique because of ongoing trade disputes.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Justin Tang</span></span>
</figcaption>
</figure>
<p>If we are unlucky enough to retain full-fledged supply management in NAFTA, we will have to pay dearly, and other sectors will suffer. Already, we have conceded some market opening in dairy in the Canada-EU Agreement and the Comprehensive and Progressive Trans-Pacific Partnership, much to the very vocal chagrin of the dairy lobby, and it is time to use the leverage of opening our dairy market to obtain other concessions from the Americans.</p>
<p>In outlining the drawbacks of defending supply management in Canada, I am not blind to the fact that the U.S. likewise does not have “clean hands” in a number of agricultural sectors, including dairy, although its support systems are not as draconian as supply management.</p>
<p>Those U.S. barriers are a legitimate subject for negotiation, but as long as we insist on stonewalling and missing every possible opportunity to reform own supply management system, we cannot attack the barriers that limit our own exports.</p>
<p>The next time the dairy farmers drag their cows on to Parliament Hill, they should be ignored and taken for what they are — a self-interested lobby that is holding the Canadian consumer and the rest of the Canadian economy to ransom.</p><img src="https://counter.theconversation.com/content/98127/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Hugh Stephens does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Canada’s protectionist stance on dairy products has attracted the ire of Donald Trump. The U.S. president raises legitimate points about a system that costs Canadians at home and abroad.Hugh Stephens, Executive Fellow at the School of Public Policy; Fellow of the Canadian Global Affairs Institute, University of CalgaryLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/936322018-03-22T22:05:40Z2018-03-22T22:05:40ZNew NAFTA or no NAFTA? How Trump’s ire could affect Canadian agri-food<figure><img src="https://images.theconversation.com/files/211434/original/file-20180321-165580-1aj51tt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Donald Trump doesn't liked to be reined in, which is why he has such a problem with trade deals like NAFTA.</span> <span class="attribution"><span class="source">(The Associated Press)</span></span></figcaption></figure><p>The main objective of international trade agreements like NAFTA is to put limits on the ability of politicians to intervene in trade matters — for example, mutually agreeing to remove tariffs on certain goods and never raising them in the future.</p>
<p>This ensures that society benefits from trade by increasing the predictability and reducing the risks for companies wishing to engage in international commerce.</p>
<p>In the past, when politicians were unconstrained — when there were no rules of trade — <a href="https://www.cnbc.com/2018/03/02/trumps-easy-win-trade-war-is-a-no-win-situation-for-wall-street-and-main-street.html">the result was economically damaging, beggar-thy-neighbour trade wars.</a></p>
<p>A system of rules for trade has been in place since 1947, with the successful negotiation of the multilateral <a href="https://www.wto.org/english/tratop_e/gatt_e/gatt_e.htm">General Agreement on Tariffs and Trade (GATT).</a> NAFTA fits within that rules-based system.</p>
<p>Over the 70-year span since the GATT rules were established, politicians have generally accepted the constraints on their actions that have been agreed upon — often by the elected officials who preceded them.</p>
<p>U.S. President Donald Trump, of course, is not cut from that cloth. He does not accept that there should be constraints on his freedom to act as he sees fit.</p>
<h2>Trump faces limits</h2>
<p>This is not only manifest in the sphere of international trade, but also more broadly. He rails against constraints, but nonetheless <a href="https://www.cnn.com/2018/02/15/politics/travel-ban-ruling/index.html">the courts have limited his ability to ban travellers</a> from certain countries, and the United States Congress <a href="https://www.upi.com/Trump-No-construction-on-border-wall-until-Congress-OKs-funding/9901519820758/">has so far denied him the funds</a> to build a wall on the Mexican border.</p>
<p>When Trump refers to existing <a href="https://www.bnn.ca/trump-vows-to-fix-bad-trade-deals-as-republicans-seek-to-save-nafta-1.983621">trade deals as being bad deals for the U.S.</a> or the <a href="http://www.bbc.com/news/av/world-us-canada-37479586/nafta-single-worst-deal-ever-approved">worst deal ever</a>, he is not really speaking about specific trade policies. Rather, he’s complaining that previous administrations have agreed to provisions that hem him in.</p>
<p>In an attempt to exert his ability to act as he sees fit, <a href="https://www.washingtonpost.com/business/economy/trump-prepared-to-hit-china-with-60-billion-in-annual-tariffs/2018/03/19/fd5e5874-2bb7-11e8-b0b0-f706877db618_story.html">Trump recently chose to hike tariffs</a> to punish countries he accuses of trading unfairly because they’re running trade surpluses with the U.S. or have been able to induce firms to move production, and jobs, out of the United States.</p>
<p>As an expert on agri-food trade who has advised on trade agreements since the pre-NAFTA Canada-U.S. Trade Agreement (CUSTA) negotiations, I believe the Trump administration forced, under threat of cancellation, the renegotiation of NAFTA — primarily to remove constraints on his freedom to act in trade matters concerning Mexico and Canada. </p>
<h2>Agriculture not a big U.S. target</h2>
<p>The U.S. had no specific agricultural agenda in its desire to alter NAFTA. But if the renegotiations result in removing protections for Canada’s agri-food sector, then the risk for Canadian firms exporting farm products to the United States would likely increase considerably.</p>
<p>How?</p>
<p>The U.S. has put two major proposals on the table: To remove the NAFTA dispute settlement mechanism, and to have the new agreement subject to a cancellation review every five years.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-big-challenge-of-the-nafta-renegotiations-dispute-settlement-82394">The big challenge of the NAFTA renegotiations: dispute settlement</a>
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</em>
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<p>Removal of the NAFTA dispute settlement mechanism would, in effect, remove any constraint on the use of <a href="https://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm8_e.htm">anti-dumping and unfair subsidy/countervailing duties</a> by the United States.</p>
<p>It’s well known that the domestic institutions that carry out investigations into the types of trade disputes arising from anti-dumping and countervail actions <a href="http://thehill.com/blogs/pundits-blog/economy-budget/349111-nafta-reboot-must-settle-dispute-over-dumping-disputes">can lead to biased results</a>, but the bias is kept somewhat in check by NAFTA’s dispute settlement system.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/211108/original/file-20180320-31617-1pknpco.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/211108/original/file-20180320-31617-1pknpco.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/211108/original/file-20180320-31617-1pknpco.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/211108/original/file-20180320-31617-1pknpco.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/211108/original/file-20180320-31617-1pknpco.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/211108/original/file-20180320-31617-1pknpco.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/211108/original/file-20180320-31617-1pknpco.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Canadian Foreign Affairs Minister Chrystia Freeland, Mexican Secretary of Economy Ildefonso Guajardo Villarreal and U.S. Trade Representative Robert Lighthizer pose for a photo during the seventh round of NAFTA renegotiations in Mexico City in March 2018.</span>
<span class="attribution"><span class="source">(AP Photo/Marco Ugarte)</span></span>
</figcaption>
</figure>
<p>The beef and pork industries in Canada are well-acquainted with the risks and costs associated with U.S. anti-dumping and countervail actions. Other U.S. policies such as country-of-origin labelling <a href="http://www.cbc.ca/news/business/canada-u-s-meat-labelling-wto-1.3354048">have been moderated by the constraints inherent in dispute settlement mechanisms.</a></p>
<p>Absent NAFTA, Canada would still have access to the World Trade Organization (WTO) dispute settlement system, <a href="https://www.ictsd.org/opinion/options-for-breaking-the-wto-appellate-body-deadlock">but U.S. officials are attempting to remove that constraint as well</a>.</p>
<h2>Why locate in Canada?</h2>
<p>Having a cancellation review every five years would also make it risky to locate any processing facilities designed to serve the North American market in Canada.</p>
<p>Because most processing facilities have lifespans much longer than five years, it would be much safer for a company to locate a plant in the U.S. in the event NAFTA were to be cancelled in the near future .</p>
<p>It is fairly clear that the decision to locate major beef processing facilities in Western Canada was based on the secure market access <a href="http://ageconsearch.umn.edu/bitstream/29043/1/19020070.pdf">provided by the original CUSTA</a>. If that secure access is lost, similar investment in Canada could not be expected.</p>
<p>There is one specific agricultural issue in the NAFTA renegotiation.</p>
<p>The U.S. has asked for better access to Canadian dairy markets. <a href="http://theprovince.com/opinion/op-ed/trevor-hargreaves-foreign-lobbyists-want-to-kill-canadas-effective-supply-management-system">Canada’s supply management system</a> limits imports on milk, a range of dairy products such as cheese and ice cream as well as poultry. NAFTA has removed tariffs on most products with the glaring exception of those covered by supply management.</p>
<p>It’s an obvious and easy target for the Americans.</p>
<p>Canadian governments of all political stripes have been tenacious in defending the trade barriers needed to bolster supply management — through GATT, CUSTA, NAFTA, WTO, CETA and TPP negotiations. </p>
<p>Given that agriculture is not a focus of the Trump administration, small concessions might be expected on dairy and poultry.</p>
<h2>What’s ahead?</h2>
<p>If the NAFTA negotiations fail and the Trump administration decides to withdraw from the deal, it’s not clear whether U.S.-Canada trade relations will revert to CUSTA, with little change from NAFTA, or to the WTO.</p>
<p>If it’s the WTO, there would be higher tariffs on some agricultural products destined for the United States.</p>
<p>The Canadian government is between a rock and a hard place in the NAFTA negotiations — if they accept U.S. demands on dispute settlement and five-year reviews, then many of the benefits of NAFTA would be nullified. </p>
<p>If they do not agree, the Trump administration may withdraw from NAFTA.</p>
<p>For now, the best option is to keep everyone at the negotiating table and hope that Trump finally accepts some constraints on his behaviour.</p><img src="https://counter.theconversation.com/content/93632/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>William A. Kerr does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Part of the purpose of trade deals is to prevent politicians from inserting politics into matters of commerce. Donald Trump is bucking that trend. What does it mean for Canada and NAFTA?William A. Kerr, University Distinguished Professor, Department of Agricultural and Resource Economics, University of SaskatchewanLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/928922018-03-08T00:01:56Z2018-03-08T00:01:56ZCanada can’t win a trade war with the United States<figure><img src="https://images.theconversation.com/files/209033/original/file-20180306-146697-1ulj4gd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A welder fabricates a steel structure at an iron works facility in Ottawa on March 5, 2018. U.S.President Donald Trump's stated intention to impose new tariffs on steel and aluminum imports could start a trade war. </span> <span class="attribution"><span class="source">THE CANADIAN PRESS/Sean Kilpatrick</span></span></figcaption></figure><p><a href="http://bmorneau.liberal.ca/">Bill Morneau</a> is perhaps an influential figure in Canadian Prime Minister Justin Trudeau’s cabinet, but he’s not conducting himself like most finance ministers. Given <a href="http://business.financialpost.com/pmn/business-pmn/highlights-from-federal-budget-tabled-tuesday-by-finance-minister-bill-morneau">the budget he presented recently</a>, he may be more of a social justice warrior.</p>
<p>Supporting more diversity, equality and inclusiveness is obviously critical to the betterment of our society, but I believe most Canadians expect more from a finance minister. His recent budget was sorely lacking.</p>
<p>There were <a href="https://globalnews.ca/news/4051334/canada-2018-budget-no-plan-to-balance-books/">no plans to balance the books</a> and, most importantly, there were no mitigating strategies presented in relation to a floundering global trade environment. </p>
<p>Few details were given on the government’s plan <a href="http://www.metronews.ca/life/money/2018/03/06/many-canadian-businesses-don-t-have-post-nafta-plans.html">to deal with NAFTA’s possible demise</a> on Washington’s “America First” policy, and there were no attempts to circumvent trading challenges.</p>
<p>The ugly face of protectionism is slowly making its way across the globe. U.S. President Donald Trump announced last week he’s considering new trade restrictions, including a 25 per cent tariff on imported steel and a 10 per cent duty on aluminum, though Trump’s trade and manufacturing adviser <a href="https://www.vox.com/2018/3/7/17094756/tariffs-mexico-canada-nafta-negotiations-navarro">says Canada and Mexico will be exempt — for now,</a> and depending on how NAFTA negotiations go.</p>
<p>Nonetheless, trade wars are something Trump appears to relish.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"969525362580484098"}"></div></p>
<p>Despite recent trade deals signed by Canada, the world seems at odds with open trade, and instead everyone wants to protect their own domestic markets.</p>
<p>This is a seemingly dangerous path given that agriculture and food are often considered the most vulnerable and sensitive sectors when it comes to trade barriers. </p>
<p>They’re easy targets. Tariff or even non-tariff barriers can make a significant dent in a country’s economy almost instantly, <a href="http://www.worldbank.org/en/news/feature/2013/09/05/medidas-arancelarias">and consumers are often affected the most.</a> </p>
<p>Most economists see freer trade among nations as an absolute good until politics come along. But not all trade is created equal. Some win while others lose, and given the economics of our country, Canada cannot win many trade wars, especially not with the United States.</p>
<p>In fact, we are already witnessing how a trade war could affect the Canadian agrifood sector as Canadian pulse farmers <a href="http://www.cbc.ca/news/canada/saskatchewan/india-chickpea-tariff-pulse-industry-1.4559947">are now bracing for some major trading headwinds from India.</a></p>
<p>Some political opponents are linking our prime minister’s <a href="https://theconversation.com/justin-trudeaus-india-debacle-shows-the-pitfalls-of-nation-branding-92727">recent globally mocked visit to India</a> with the country’s decision to increase tariffs on chickpeas <a href="http://www.cbc.ca/news/canada/saskatchewan/india-chickpea-tariff-pulse-industry-1.4559947">from 44 per cent to 60 per cent, overnight. </a></p>
<p>The decision comes after India introduced a variety of tariffs on pulse crops, including lentils, peas and chickpeas, in the past few months. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/209163/original/file-20180306-146671-o798uy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/209163/original/file-20180306-146671-o798uy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=372&fit=crop&dpr=1 600w, https://images.theconversation.com/files/209163/original/file-20180306-146671-o798uy.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=372&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/209163/original/file-20180306-146671-o798uy.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=372&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/209163/original/file-20180306-146671-o798uy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=468&fit=crop&dpr=1 754w, https://images.theconversation.com/files/209163/original/file-20180306-146671-o798uy.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=468&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/209163/original/file-20180306-146671-o798uy.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=468&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Pulses are displayed with price tags at a wholesale market in New Delhi, India, in February 2018.</span>
<span class="attribution"><span class="source">(AP Photo/Altaf Qadri)</span></span>
</figcaption>
</figure>
<p>These are growth sectors for our economy. Canadian pulse exports to India alone are <a href="http://www.livemint.com/Politics/FQZLoZ2G2Vv5HXo7Ni7iDP/Justin-Trudeaus-visit-reflects-uneasy-state-of-IndoCanada.html">worth well over CDN$1 billion.</a> This could easily escalate further and affect other sectors of our agrifood economy. </p>
<p>In Europe, South America — everywhere — we are seeing more governments reducing their exposure to international markets. It cuts risks and simplifies business for many producers.</p>
<p>But there is <a href="https://www.vox.com/policy-and-politics/2018/3/4/17078240/trump-tariffs-trade-war-steel-aluminum">also considerable consensus around the world</a> that trade wars can backfire and ultimately hurt consumers. </p>
<h2>Expensive way to retain jobs</h2>
<p>Trade barriers, which are often scientifically unjustifiable but politically motivated, make economies weaker and less competitive over time. Duties may look like an attractive, simple mechanism to protect domestic interests, but they are an extremely expensive way to retain jobs in an economy.</p>
<p>But Canada doesn’t exactly have an immaculate record either on trade barriers.</p>
<p>Canada itself applies heavy duties on many imports, including dairy products, poultry and eggs. These duties are embedded <a href="https://www.thestar.com/news/canada/2017/10/16/us-takes-aim-at-supply-management-system-for-dairy-eggs-and-poultry-in-latest-nafta-talks.html">into our supply management regime</a>, considered by many as one of the most protectionist policies in the world.</p>
<p>In some cases, <a href="http://www.macleans.ca/economy/economicanalysis/why-the-dairy-industrys-defence-of-supply-management-is-so-flawed/">duties exceed 300 per cent.</a> </p>
<p>Most countries do enact duties on a variety of food products, but Canada goes even further by enabling and controlling domestic production with quotas. We are the only western economy still doing it. That makes it extremely awkward to ask trading partners for exemptions to their own trade barriers.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/209167/original/file-20180306-146671-1ct182l.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/209167/original/file-20180306-146671-1ct182l.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=397&fit=crop&dpr=1 600w, https://images.theconversation.com/files/209167/original/file-20180306-146671-1ct182l.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=397&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/209167/original/file-20180306-146671-1ct182l.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=397&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/209167/original/file-20180306-146671-1ct182l.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=499&fit=crop&dpr=1 754w, https://images.theconversation.com/files/209167/original/file-20180306-146671-1ct182l.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=499&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/209167/original/file-20180306-146671-1ct182l.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=499&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A dairy farmer holds onto a cow as he takes part in a protest in front of Parliament Hill in Ottawa in September 2015 to demand the protection of Canada’s supply management system in the Trans Pacific Partnership negotiations.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Sean Kilpatrick</span></span>
</figcaption>
</figure>
<p>What remains under-appreciated is how intertwined all economies are, not just those of the U.S. and Canada. Duties in one sector will affect the ability of other sectors to trade. It is difficult, if not impossible, to link steel and aluminum with dairy, poultry and/or eggs, but the connection exists.</p>
<p>Trade wars easily escalate, spelling trouble for an open economy like Canada’s. Given our abundance of resources and knowledge, we have plenty to share. <a href="http://www.international.gc.ca/economist-economiste/performance/state-point/state_2017_point/index.aspx?lang=eng">Almost 60 per cent of our economy is trade-driven.</a> </p>
<p>Morneau essentially short-changed Canadian taxpayers last week with his so-called budget. I believe the government’s focus on equality would have been better served at another time.</p>
<p>We should not be shocked to see Ottawa utterly unprepared for Washington’s wrath towards its trading partners. Upholding equity values for our country is undoubtedly noble, but the government could fall short on its social promises if it runs out of cash.</p><img src="https://counter.theconversation.com/content/92892/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sylvain Charlebois does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Ottawa seems utterly unprepared for a trade war with the United States. The recent federal budget upholding equity values is noble, but won’t mean a thing if the government runs out of cash.Sylvain Charlebois, Professor in Food Distribution and Policy, Dalhousie UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/911292018-02-05T23:28:09Z2018-02-05T23:28:09ZWhat if Trump kills NAFTA? Remedies for Canada and Mexico<figure><img src="https://images.theconversation.com/files/204659/original/file-20180202-19956-1rd3hsl.jpg?ixlib=rb-1.1.0&rect=1149%2C0%2C1037%2C1917&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Canadian Foreign Affairs Minister Chrystia Freeland with U.S. Trade Representative Robert Lighthizer, right, and Mexico's Secretary of Economy Ildefonso Guajardo Villarrea, deliver statements to the media during the sixth round of negotiations for a new North American Free Trade Agreement in Montreal in January 2018. </span> <span class="attribution"><span class="source">THE CANADIAN PRESS/Graham Hughes</span></span></figcaption></figure><p>NAFTA has come under a series of threats since Donald Trump became the 45th president of the United States. </p>
<p>According to his tweets and public comments, the president believes strongly that NAFTA is a disastrous trade deal for the U.S.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"901804388649500672"}"></div></p>
<p>But Trump has different issues with NAFTA when it comes to Canada and Mexico. And there are ways for both countries to fight back, regardless of NAFTA’s ultimate fate.</p>
<h2>Canada</h2>
<p>In Canada, most businesses are worried about any potential collapse of NAFTA.</p>
<p>The <a href="https://ipolitics.ca/2018/01/28/nafta-2-0-slow-progress-progress/">slow progress</a> in the NAFTA talks has created grave uncertainty and this could have a detrimental effect on decision-making. It seems Canada is more concerned about the stability of NAFTA than the U.S. </p>
<p>This isn’t surprising because the Americans have diversified their exports much more than Canada has — <a href="http://www.international.gc.ca/economist-economiste/performance/state-point/state_2017_point/index.aspx?lang=eng">the U.S. accounts for more than 75 per cent of Canadian exports. </a></p>
<p>However, the exit clause under NAFTA requires <a href="http://www.sice.oas.org/trade/nafta/chap-22.asp">six month’s notice</a> before any member country can withdraw. That should be enough time for any business to devise alternative strategies or find new places to sell their goods as well as new importers, and to therefore minimize any potential economic damage from the eventual collapse of NAFTA.</p>
<p>With or without NAFTA, Canada can still remain competitive in the North American market, especially as Canada remains a natural trading partner for the United States. </p>
<p>Canadians share a common border, a common language, similar cultural and social values and almost identical consumer tastes and preferences with Americans. That should help reduce the costs of doing trade between the U.S. and Canada even in the absence of a trade agreement. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/204726/original/file-20180204-19952-1m03ec8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/204726/original/file-20180204-19952-1m03ec8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=462&fit=crop&dpr=1 600w, https://images.theconversation.com/files/204726/original/file-20180204-19952-1m03ec8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=462&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/204726/original/file-20180204-19952-1m03ec8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=462&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/204726/original/file-20180204-19952-1m03ec8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=581&fit=crop&dpr=1 754w, https://images.theconversation.com/files/204726/original/file-20180204-19952-1m03ec8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=581&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/204726/original/file-20180204-19952-1m03ec8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=581&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Prime Minister Justin Trudeau, left, holds up a pair of socks that he received as a gift from American talk show hosts Kelly Ripa, centre, and Ryan Seacrest during his appearance on Live with Kelly and Ryan in Niagara Falls, Ont. in June 2017.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Aaron Lynett</span></span>
</figcaption>
</figure>
<p>Without NAFTA, Canada may have to resort to most-favoured nation (MFN) tariffs, which is what the U.S. has imposed on WTO member countries. Facing MFN tariffs of about 3.5 per cent on average will not significantly lower the competitiveness of Canadian exporters in the U.S.</p>
<p>There are many other possible remedies Canada can embark upon as a country to minimize uncertainty about NAFTA. One main tool will be diversifying its export market to significantly reduce Canada’s dependence on just a few export markets or destinations. </p>
<p>Already, the government is diversifying by signing two major trade agreements: The Comprehensive Economic and Trade Agreement (CETA) with the European Union and the Trans-Pacific Partnership (TPP) with Pacific Rim countries.</p>
<p>Incidentally, Canada’s embrace of TPP may have contributed to a <a href="https://www.japantimes.co.jp/news/2018/01/27/business/economy-business/trump-woos-davos-tpp-trade-deal-shift-says-u-s-open-business/#.Wnc8jqinHIU">change in Trump’s rhetoric</a> about TPP being a bad deal. It doesn’t seem a mere coincidence that just as Canada signed the pact, the U.S. president was in Davos suggesting the U.S. was ready to negotiate bilaterally or regionally with any TPP countries.</p>
<p>The Canadian government must also focus on how to improve the economic environment to make firms and businesses operating in Canada competitive. </p>
<p>There are lots of WTO-consistent ways and means that Canada can do this, especially by supporting research and development that promote innovations and competitiveness for Canadian businesses, and backing technological innovations and making them accessible to many businesses at minimal costs.</p>
<p>Technological advancement is more beneficial when there is direct collaboration between universities and businesses, and so businesses should be encouraged to fund and support research. </p>
<p>That type of direct collaboration may lead to development of technologies that will be tailored to Canadian businesses and make them more competitive in the world market.</p>
<p>Governments must therefore incentivize businesses that fund research by giving them tax rebates.</p>
<p>New and innovative technologies can also be driven by skilled workers. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/204727/original/file-20180204-19956-nzyo5u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/204727/original/file-20180204-19956-nzyo5u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=449&fit=crop&dpr=1 600w, https://images.theconversation.com/files/204727/original/file-20180204-19956-nzyo5u.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=449&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/204727/original/file-20180204-19956-nzyo5u.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=449&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/204727/original/file-20180204-19956-nzyo5u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=564&fit=crop&dpr=1 754w, https://images.theconversation.com/files/204727/original/file-20180204-19956-nzyo5u.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=564&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/204727/original/file-20180204-19956-nzyo5u.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=564&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A protest against Trump’s immigration policies in Los Angeles in September 2017.</span>
<span class="attribution"><span class="source">(AP Photo/Reed Saxon)</span></span>
</figcaption>
</figure>
<p>Canada can take real advantage right now of the Trump administration’s <a href="https://www.hrw.org/news/2017/12/05/us-devastating-impact-trumps-immigration-policy">anti-immigration policies</a> and attract more skilled labour from the rest of the world. </p>
<p>Skilled immigrants have contributed enormously to many nations, including the U.S., so the Canadian government must intensify its efforts to attract new skilled workers by reducing the standards, time and costs for skilled immigrants who want to come to Canada.</p>
<h2>Time to revisit ‘supply-management’</h2>
<p>Revisiting supply-management policy may also have direct implication for agricultural sector competitiveness in Canada. The policy, which dates back to the 1970s, involves Canada using fixed prices, production quotas and so-called tariff-rate quotas to protect its dairy, egg and poultry sectors. </p>
<p>The U.S. is demanding the phasing-out of supply management over a period of 10 years. And, in fact, supply management may not be helping Canadian farmers to be competitive. </p>
<p>There exists a huge domestic market in the agri-food sector, and supply management is considered by some <a href="https://biv.com/article/2017/10/naftas-demise-would-force-canadas-agri-food-sector">to be a major constraint.</a> Looking, for example, at the dairy sector in the figure below, Canada has consistently experienced increasing trade deficits. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/204732/original/file-20180204-19925-ty5940.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/204732/original/file-20180204-19925-ty5940.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=270&fit=crop&dpr=1 600w, https://images.theconversation.com/files/204732/original/file-20180204-19925-ty5940.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=270&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/204732/original/file-20180204-19925-ty5940.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=270&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/204732/original/file-20180204-19925-ty5940.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=340&fit=crop&dpr=1 754w, https://images.theconversation.com/files/204732/original/file-20180204-19925-ty5940.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=340&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/204732/original/file-20180204-19925-ty5940.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=340&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Agriculture and Agri-Food Canada.</span>
</figcaption>
</figure>
<p>With increasing trade deficits, this means that Canada is still import-dependent; it imports more than it exports. Increasing imports indicate that there is a huge domestic market for dairy.</p>
<p>Farmers could have easily improved their domestic competitiveness through economies of scale. The increasing dairy imports also suggest that even after paying out tariff-rate quotas, foreign farmers are still competitive in the Canadian market.</p>
<p>Phasing out supply management, therefore, may improve the competitiveness of Canadian farmers and give Canadian consumers competitive prices for dairy/poultry products. </p>
<p><a href="http://www.macleans.ca/opinion/why-is-canada-jeopardizing-nafta-to-protect-13500-farmers/">Many experts are asking</a> why the government is willing to continuously sacrifice the gain of millions of Canadian consumers for the gain of a few farmers.</p>
<p>What’s more, there are contingency measures within the WTO that Canada can use to protect certain sectors if import surges threaten or pose serious risks to the Canadian economy.</p>
<h2>Mexico</h2>
<p>Trump’s problem with Mexico seems to stem from the fact that he finds it unthinkable that the U.S. should have a trade deficit with the Mexicans at all. He also takes issue with migrants crossing the border to illegally reside in the U.S. </p>
<p>That has resulted in his infamous protectionist proposals of imposing tariff barriers in the form of a border adjustment tax of about 20 per cent on Mexican imports, and <a href="https://www.cnn.com/2017/01/26/politics/donald-trump-mexico-import-tax-border-wall/index.html">his plan to build a wall</a> on the U.S.-Mexico border.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/204736/original/file-20180204-19944-1cwohd8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/204736/original/file-20180204-19944-1cwohd8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/204736/original/file-20180204-19944-1cwohd8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/204736/original/file-20180204-19944-1cwohd8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/204736/original/file-20180204-19944-1cwohd8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/204736/original/file-20180204-19944-1cwohd8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/204736/original/file-20180204-19944-1cwohd8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A U.S. border patrol agent walks along a portion of the border wall in San Diego, Calif., in 2016.</span>
<span class="attribution"><span class="source">(AP Photo/Gregory Bull)</span></span>
</figcaption>
</figure>
<p>Given the U.S. and Mexico are members of both the World Trade Organization and NAFTA, the implementation of Trump’s Mexican border tariff will contravene WTO principles that stipulate non-discrimination between WTO member countries. Practically speaking, it won’t be feasible for the U.S. to apply the tariff. </p>
<p>Nonetheless, the U.S. can also take advantage of WTO contingency measures, and employ a measure that guards against surges in Mexican exports. But the Americans would have to apply it in a non-discriminatory manner to all their trading partners.</p>
<p>In addition, the U.S. would have to demonstrate a causal link between the increase in imports and serious harm to domestic industry in order to justify the application of the safeguards. The Americans would also be expected to offer compensation to exporters of all countries that would be affected by any use of such safeguards.</p>
<figure class="align-left ">
<img alt="" src="https://images.theconversation.com/files/204662/original/file-20180202-19944-1kapzek.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/204662/original/file-20180202-19944-1kapzek.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=468&fit=crop&dpr=1 600w, https://images.theconversation.com/files/204662/original/file-20180202-19944-1kapzek.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=468&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/204662/original/file-20180202-19944-1kapzek.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=468&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/204662/original/file-20180202-19944-1kapzek.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=589&fit=crop&dpr=1 754w, https://images.theconversation.com/files/204662/original/file-20180202-19944-1kapzek.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=589&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/204662/original/file-20180202-19944-1kapzek.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=589&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Mexico’s chief negotiator Kenneth Smith Ramos speaks to the media at the sixth round of the North American Free Trade Agreement in January in Montreal.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Ryan Remiorz</span></span>
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<p>The United States has the flexibility to increase its tariffs on a non-discriminatory basis, provided the new tariffs are not above the so-called “bound rate” of approximately 3.5 per cent (the individual commitment made by all WTO members not to raise the tariff above a specified level). </p>
<p>However, the proposed border tariff of 20 per cent is far above that. And so if the U.S. insists upon imposing the border tax on Mexico, it will result in Mexico filing a complaint with the <a href="https://www.wto.org/english/tratop_e/dispu_e/dispu_e.htm">dispute settlement body</a> of the WTO.</p>
<p>If it is determined that the U.S. is off side, Mexico can then ask for permission to retaliate.</p>
<p>Obviously, with a higher tariff, U.S. companies (especially those producing import substitutes or similar goods to Mexico) could especially benefit in terms of higher market share and higher prices for those goods. However, this could also potentially boost the costs of production for U.S. companies that use goods and raw materials from Mexico to make their products. </p>
<p>One argument in favour of the border tariff is that it would allow the U.S. government to raise revenues to fund projects, especially the border wall.</p>
<p>Ultimately, though, American consumers would also suffer a loss: They’d be forced to pay higher prices for goods imported or produced domestically with Mexican content.</p>
<p>Apart from these costs and gains, there would be additional costs to U.S. exporters if WTO-sanctioned trade retaliations are applied following complaints from Mexico.</p><img src="https://counter.theconversation.com/content/91129/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sylvanus Kwaku Afesorgbor does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Donald Trump has described NAFTA as the worst trade deal ever signed by the United States. As NAFTA talks continue, here’s what Canada and Mexico can do if the unthinkable happens.Sylvanus Kwaku Afesorgbor, Assistant Professor, Agri-Food Trade and Policy, University of GuelphLicensed as Creative Commons – attribution, no derivatives.