U.S. dairy lobby increases pressure on Canada; NAFTA fight looms

OTTAWA/WINNIPEG (Reuters) – The U.S. dairy lobby is ratcheting up the pressure on Canada as talks to renegotiate NAFTA draw closer, demanding concessions the Canadian government looks unwilling to grant, according to people familiar with the file.

The result could be a brawl that sours efforts to modernize the North American Free Trade Agreement, under which Canada sends most of its exports to the United States. Mexico is the pact’s third member.

U.S. farmers have long chafed about supply management, the term for Canada’s system of tariffs and quotas to keep domestic prices high and imports low. A 2016 deal that allowed Canadian farmers to sell milk proteins, which are used to make cheese and yogurt, to domestic processors at a discount, curbing the flow of American imports, further raised their ire.

Jaime Castaneda, senior vice president for the U.S. Dairy Export Council, said the influential lobby group will pursue fresh challenges through the World Trade Organization unless Canada stops the proteins sale.

“If we can’t resolve this through negotiations, I believe my members will be very clear that everything is on the table,” he said in a phone interview.

A WTO panel ruled in 2002 that Canada breached its trade obligations through illegal subsidies to its dairy industry, siding with the United States. The United States and Canada reached a settlement in 2003.

Castaneda said challenges against the protein sales could eventually result in rulings that force Canada to ditch supply management.

In June, U.S. Agriculture Secretary Sonny Perdue said he would prefer to address dairy irritants before NAFTA talks begin and said supply management was fine as long as though it did not harm the U.S. industry.

But on July 14 he appeared to toughen his stance, saying through a spokeswoman he felt “all options should be on the table” in the NAFTA talks and that dairy remained a concern.

Washington released its goals for negotiating NAFTA on Monday, saying it sought to…

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