Key Takeaways
- The United States has signaled its intention to challenge Canada’s supply management system in dairy trade negotiations
- Canadian Prime Minister Mark Carney has reaffirmed his commitment to protecting the supply management system
- The US has also raised concerns about Canada’s laws impacting online platforms and the boycotts of US alcohol in some provinces
- The formal review of the Canada-US-Mexico Agreement (CUSMA) is set to begin next year, with the possibility of extending the agreement past its 2036 expiration date
- The US has also expressed frustrations with Mexico related to supply chains, energy policies, and labor laws
Introduction to the Trade Dispute
The trade dispute between Canada and the United States has escalated, with the US signaling its intention to challenge Canada’s supply management system in dairy trade negotiations. US Trade Representative Jamieson Greer told members of US Congress that Washington is not prepared to extend the Canada-US-Mexico Agreement (CUSMA) without addressing "specific and structural issues" related to dairy market access in Canada. This move has prompted a strong response from Canadian Prime Minister Mark Carney, who has reaffirmed his commitment to protecting the supply management system.
The Supply Management System
The supply management system, which dates back to the 1970s, is designed to ensure predictable and stable prices by guaranteeing supply-managed farmers a minimum price for their products. The system is fiercely protected by the dairy industry, particularly in Quebec, where it is seen as essential to the livelihood of dairy farmers. Carney’s decision to respond to a question on supply management in French, while speaking alongside Ontario Premier Doug Ford, was a clear signal of his commitment to protecting the system. The policy has been a point of contention between Canada and the US, with the US arguing that it unfairly restricts market access for US dairy products.
US Demands and Canadian Response
The US has linked expanded access to the dairy market as a crucial step for CUSMA talks to be successful. Greer argued that Canada "maintains policies that unfairly restrict market access for US dairy products." However, Canada does allow some US dairy products to trade into Canada tariff-free, with import quotas negotiated under CUSMA designed to give US producers tariff-free access worth roughly 3.5% of Canada’s domestic demand for dairy products. The US dairy lobby has been pushing for those rules to be loosened, flagging two main irritants: how the Canadian government allocates the existing quotas for tariff-free imports of dairy products, and how Canadian producers dump milk protein into the international market. Carney has responded by saying that supply management is "not on the table" and that the government will "only sign an agreement" that works for Canadians.
Broader Trade Issues
The trade dispute between Canada and the US extends beyond the dairy market. Greer also named two other trade grievances with Canada: its laws impacting online platforms like Netflix, Spotify, and YouTube, and the ongoing boycotts in some provinces of US alcohol. Carney acknowledged that these issues are part of a much bigger discussion and that the government will approach the negotiations with a focus on protecting Canadian interests. The formal review of CUSMA is set to begin next year, when the three countries can decide to extend the agreement past its 2036 expiration date.
Recent Developments and Future Outlook
The trade talks between Canada and the US have been marked by recent developments, including the abrupt cancellation of talks by US President Donald Trump in late October. Trump cited an ad run by the Ontario government featuring former US President Ronald Reagan speaking out against tariffs as the reason for the cancellation. Carney has said that the two sides "were close to an agreement" before the ad aired, and that the government is committed to finding a resolution that works for Canadians. As the formal review of CUSMA approaches, it remains to be seen how the trade dispute between Canada and the US will be resolved, and what the implications will be for the dairy industry and other sectors affected by the agreement.
