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3 open minutes with Yves Leduc

Progressive Dairyman Editor Karen Lee Published on 31 July 2017

With international trade issues at the forefront this summer, Progressive Dairyman Editor Karen Lee interviewed Yves Leduc, director of policy and trade, Dairy Farmers of Canada, to find out what it means for Canada’s dairy industry.

How would you describe the state of Canada’s dairy industry?

3 minutes with Yves LeducLeduc: We’ve been experiencing tremendous growth the last three to four years, and this has been very welcome after years of what I would qualify as stagnation, where the industry was growing at more or less than 1 percent, reflective of the population growth.

The mood is very, very positive. Farmers and processors are looking forward to the future.

What is driving this increase of quota?

Leduc: Increased demand for butterfat in various forms – in part due to increased consumption and increased demand for butter, increased consumption of cheese and increased consumption of higher-fat milk and higher-fat yogurt.

I think that is being observed as well in the U.S. Those countries that have a dairy tradition have been experiencing growth [in butterfat demand].

Has this led to an increase of skim milk powder exports?

Leduc: We’re not even a player on the world market, especially when you compare the size of the Canadian dairy industry with the size of the U.S. dairy industry. We have the right to export some products on the world market, and we have been doing that for a long time.

Of course, there are some limitations with respect to what we are able to put on the market. As far as I’m concerned, we have been respecting our international obligations.

When I look at the situation in the U.S., there is a chronic oversupply of milk, in particular skim milk powder. Fifteen percent of the U.S. milk production is being exported on the world market.

That is no longer marginal production being exported; it is significant. So to accuse Canada for being the cause of the distortions that apparently exist on the world market – I’m sorry, I cannot accept that.

Canada is far from being a major exporter of skim milk powder on the world market.

Could the national ingredient strategy be challenged at the World Trade Organization (WTO)?

Leduc: Everything is possible. If the U.S. is convinced it has a case, then it’s up to them to take that case before the WTO. As far as we are concerned, the ingredient strategy is a business-to-business agreement which was developed between the processors and the farmers to adapt to ever-changing market conditions in Canada.

In due diligence, we are making sure we are responding to the needs of the Canadian market. We firmly believe the agreement respects Canada’s international obligations as per the international agreements Canada is a signatory to.

What are Canada’s dairy goals for the renegotiation of the North American Free Trade Agreement (NAFTA)?

Leduc: Our goals are to essentially maintain the status quo here. We believe the current situation does benefit the U.S. as measured by the current trade balance. The U.S. exports five times what we export to the U.S., so there is a $400 million trade surplus to the benefit of the U.S. when it comes to Canada-U.S. dairy trade. That is significant.

Our friends in the U.S. recently accused Canada of using tariffs and non-tariff measures impeding dairy trade. This is hypocritical. The U.S. also has tariffs and non-tariff measures limiting the access of milk and dairy products into the U.S.

We have to stop thinking only Canada has put in place tariff-rate quotas (TRQ). As a matter of fact, when the Uruguay Round was concluded, which was the agreement that resulted in the creation of the WTO, the U.S. introduced as part of this agreement 24 TRQs for milk and dairy products. Canada introduced 12.

It’s easy to ask for a more open market between Canada and the U.S., but when is the U.S. going to put the farm bill on the table?

It was one thing to talk about how comprehensive the TPP agreement was and the CETA agreement, which was negotiated between Canada and the EU a couple of years before, but neither of these agreements dealt with domestic support. They felt the issue of domestic support was an issue that needed to be dealt with at the WTO.

Right now, when I look at the disengagement of the U.S. government from the multi-lateral process of WTO, for example, I don’t see when the issue of disciplining domestic support will be addressed.

I can foresee we’re probably light-years away from that unless it is being addressed as part of the renegotiation of NAFTA. Yet it appears the U.S. is not interested in leveling the playing field from a domestic support perspective.

How have the preliminary NAFTA discussions been going?

Leduc: There have been a lot of meetings between Canadian officials and U.S. officials since the new administration has taken office. From an observer’s perspective, I think the relationship at the political level, generally speaking, is fairly good.

There are obviously some irritants we are reading about every day – dairy, softwood lumber and aircraft, for example. The “Buy American, Hire American” executive order; that’s an irritant to Canada. The threat of bringing back country of origin labeling is another issue both governments will have to address as part of their discussion.

But I think what is important to understand here is: Despite the pressure that has come primarily from the industry in the U.S., the Canadian government has remained very, very strong in their support and defense of the Canadian model in the dairy sector.

We have strong confidence the Canadian government, just like they did in other trade negotiations, is going to remain strong defending the model that has served the interests of Canadians.

I’m not talking about just the producers or the processors, but even the Canadian consumers who are being supplied with high-quality dairy products at very, very stable prices. Recent surveys show a strong majority of Canadians do support the maintenance of the Canadian supply management system in dairy.

What is the status of the EU-Canada Comprehensive Economic and Trade Agreement (CETA)?

Leduc: We understand there may be a few small irritants moving forward with the entry into force of the agreement. If it’s not July 1, it may be delayed by a few weeks or a month or so. I think it’s simply a matter of time before the agreement is entered into force.

What does the next year look like for Canadian dairy policy?

Leduc: It looks pretty good. We feel we have a bright future here from a domestic perspective with very, very strong demand for milk and milk products. We’re hoping that will continue to grow.

We will obviously pay close attention to the NAFTA renegotiations because there is no doubt we have been targeted by the American dairy sector, but domestically I think the markets are doing well.  end mark

Karen Lee
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