Trade deal looks positive for Michigan dairy farmers
Michigan dairy farmers are anything but cheesed over the trade deal reached between Canada, Mexico and the United States.
The countries said late Sunday that Canada would join the U.S. and Mexico in replacing the North America Free Trade Agreement. The new deal is called the United States-Mexico-Canada Agreement. In it, Canada would open more of its dairy market to trade and drop its quota and pricing system for "Class 7" milk powders and proteins, a move that could benefit Michigan's struggling dairy industry.
"At a time when we've seen a steady decline in prices, hopefully, something good will come from this new market opportunity," said John Kran, the Michigan Farm Bureau's national legislative counsel. "I don’t think it will bring the dairy industry to where it needs to be, but it moves it in the right direction."
The U.S.'s northern neighbor last year raised tensions in negotiations over NAFTA by increasing tariffs on a class of ingredients known as ultrafiltered milk, which is used to make cheese, yogurt and other dairy products. What had grown nationally to $102 million in exports in 2016 was squelched at a time when America's dairy industry, today in its fourth consecutive year of low prices, was seeing prices near or below production.
The agreement would ensure that the prices for these products in Canada will be set at least at U.S. prices and would limit the export of surplus amounts. Ken Nobis, president of the Michigan Milk Producers Association, said those limits will help to prevent Canada from continuing to dump their products in the global market.
"It had an effect on everybody, but especially us," Nobis said. "It’ll have a positive impact on prices. How much of a positive remains to be seen."
The pact, Kran said, would open up about 3.6 percent of Canada's dairy market, comparable to the access of European Union dairy producers. It is slightly higher than the level to which Canada agreed under the 12-nation Trans-Pacific Partnership agreement that the Trump administration abandoned last year.
The three nations are expected to sign the new NAFTA by the end of November. The sooner, the better, Kran said, as U.S. dairy farmers have seen increased competition with Canada and the European Union over cheese in Mexico, the U.S.'s largest dairy trading partner. Of Michigan's nearly $95 million in dairy exports, more than $17 million went to Mexico in 2017.
The new agreement also could provide a framework for making trade deals with other countries, particularly in the Asia Pacific region.
"The big picture is it could open a lot more trading partners," Kran said. "We're looking forward to the opportunity to share with more of those in the world the great agricultural products Michigan has."