Sour Milk: How Canada May Be a Loser under NAFTA 2.0 (USMCA)

MILWAUKEE, WISC. – During the NAFTA renegotiations earlier this year, President Trump targeted Canada’s supply managed dairy sector particularly as needing to be reformed. Canada already exports skim milk powder (a protein product), because the supply managed system leads to too much milk to satisfy the domestic protein demand while satisfying the domestic butter fat demand. The USMCA will permit more U.S. protein import, leading to lower protein prices in Canada, which will reduce the price dairy farmers receive.

In the new article “Reforming Canada’s Dairy Sector: USMCA and the Issue of Compensation,” released in AEPP, G. Cornelis van Kooten from the University of Victoria looks into the winners and losers of the new trade agreement.

Author van Kooten says, “The EU implemented supply management in the early 1980s to reduce its export subsidy costs, which it had to eliminate in any event as a result of the 1995 WTO Agreement on Agriculture. In contrast, Canada started supply management in dairy in the early 1970s and was not an exporter, which made the analytical analysis of the two situations different and thus the income redistribution consequences of dairy reforms. Assuming the government wished to compensate dairy producers, I applied three methods to estimate the potential cost of a quota buyout. The cost is estimated to be much lower than what had been anticipated.”

The article “Reforming Canada’s Dairy Sector: USMCA and the Issue of Compensation” is available online for a limited time. If you are interested in setting up an interview, please contact Allison Scheetz in the AAEA Business Office.

ABOUT AAEA: Established in 1910, the Agricultural & Applied Economics Association (AAEA) is the leading professional association for agricultural and applied economists, with 2,500 members in more than 60 countries. Members of the AAEA work in academic or government institutions as well as in industry and not-for-profit organizations, and engage in a variety of research, teaching, and outreach activities in the areas of agriculture, the environment, food, health, and international development. The AAEA publishes two journals, the American Journal of Agricultural Economics and Applied Economic Perspectives & Policy, as well as the online magazine Choices. To learn more, visit