Trump's dairy dilemma

The Trump administration wants any NAFTA 2.0 deal involving Canada to feature major concessions on dairy from America’s northern neighbor. The dairy standoff is one of the most challenging issues facing trade negotiators in each country because of political considerations on both sides of the border. Trudeau’s Liberal Party is vying to maintain its supporters in Ontario and Quebec, where the country’s powerful dairy industry is concentrated and provincial elections are approaching. The Trump administration, looking ahead to the November elections, wants to bolster support among a hard-hit dairy sector that’s struggling with a global milk glut and depressed prices. At issue is market access to Canada’s $17 billion dairy sector, which operates under a so-called supply management system that limits production, restricts imports and sets floor prices — similar to American sugar policy. U.S. trade negotiators want Canada to expand import quotas that currently permit only a small amount of dairy products to enter the country tariff-free, as well as eliminate a low-price policy for a protein-rich milk ingredient called ultrafiltered milk, which is used to make cheese and yogurt. It’s formally known as Class 7.Gregg Doud, USTR’s chief agricultural negotiator, told senators last week that ending Class 7 is the major focus of dairy talks. Two former U.S. trade negotiators and experts on U.S.-Canada relations told POLITICO they expect Canada to open a small percentage of its dairy market by expanding quotas that allow imports to cross the border tariff-free. The new access would likely be similar to what Canada offered the European Union and Asia Pacific nations in recent trade deals: an additional 5 percent of its cheese market and 3.5 percent of its overall dairy market, respectively.