The USMCA (United States-Mexico-Canada Agreement) has been in the news for a while now, and one of the industries that has been affected by this agreement is the dairy industry. The dairy industry has been one of the areas of focus in the USMCA negotiations; this is because dairy is a significant economic driver for all three countries.
The agreement, which was signed in 2018, replaced the North American Free Trade Agreement (NAFTA) after almost 25 years of being in place. The USMCA aims to modernize and update NAFTA, improving upon trade relations and policies between the three nations. Agriculture, including dairy, is one of the key areas of focus in the agreement, and the changes are significant.
One of the most significant changes brought about by the USMCA in the dairy industry is the elimination of Canada`s Class 7 milk pricing system. The system was introduced in 2017 and aimed to keep the prices of Canadian milk ingredients lower than US equivalents, making Canadian dairy products more affordable to local manufacturers. The system was a sore point for America`s dairy industry, which felt it gave Canadian dairy products an unfair advantage in the market.
Under the new agreement, Canada agreed to dismantle the Class 7 system and eliminate export subsidies on various dairy products such as milk powders, cheeses, and protein concentrates. This move will open up Canada`s market, creating a more level playing field for American dairy farmers and manufacturers.
In return, the US has increased its market access to Canada`s dairy sector. Canada agreed to provide the US with an additional 3.6% of access to its dairy market, amounting to approximately $2.1 billion worth of dairy products. American producers now have greater access to sell some dairy products to Canada without being subject to tariffs.
The USMCA also includes measures to increase transparency and to enforce sanitary and phytosanitary (plant health) measures. This is to ensure that all dairy products imported into the three countries are safe and meet the regulatory requirements of each country.
While the dairy industry has long been a contentious issue in trade negotiations between the US, Mexico, and Canada, the USMCA has brought about some significant changes that aim to create a fairer and more open system for all parties involved. The removal of Canada`s Class 7 system will facilitate trade and competition, benefiting American dairy farmers and manufacturers. With these changes, the dairy industry is expected to continue thriving under the USMCA.
