By Patrick Luciani
and Owen Lippert
Atlantic Institute for Market Studies
If U.S. President Donald Trump is looking for friends, he won’t find them in Canada, especially after dressing down Prime Minister Justin Trudeau for being “very dishonest” at the G7 meeting in Quebec earlier this year. That insult won’t be soon forgotten.
But unintentionally, Trump was the only one on the side of ordinary Canadians when renegotiating the North American Free Trade Agreement (NAFTA) regarding dairy products.
The new United States-Mexico-Canada Agreement (USMCA) lowered the dairy food bills for Canadian families – despite the opposition of every Canadian member of Parliament, save Maxime Bernier.
Even the provinces supported continued protection for the dairy industry and its wealthy producers against lower prices for consumers.
Trump likely won’t receive many thanks from mothers in Toronto or Montreal. Fair enough. But Canadian consumers who pay from a third to 50 per cent more for their cheese and milk than those in other countries will now see some relief. It’s not unusual for Canadians to pay US$10 for about 10 ounces of cheddar cheese.
Lower prices will come now because Trump insisted that the USMCA trade pact allow greater access to Canada’s highly protected dairy sector. The new pact will give dairy-producing states such as Wisconsin free access to just under four per cent of Canada’s dairy market, representing about $70 million.
That doesn’t seem like much but it’s a good start. Already Canada’s dairy sector is complaining bitterly over this small concession.
Trump’s demand brought a small but notable last-minute compromise by Prime Minister Justin Trudeau, who had first sworn not to give up a single glass of milk to the U.S.
Trump took Canada’s dairy tariffs seriously. Since the 1970s, Canada’s dairy industry has set its wholesale prices and then got governments to reinforce limits on supply. Governments restricted domestic suppliers with quota allocations and kept out American and foreign products with tariffs over 250 per cent.
The Canadian dairy industry always hoped that Canada’s market was too small for the Americans to notice.
But Trump did notice and Canadian families should be grateful.
In an ideal world, the success of trade agreements would be measured by how they benefit consumers. But in a world of lobbyists, trade unions, home-town mayors and chambers of commerce, the opposite is true. Success is measured instead by the benefit to producers.
Hence, Canadian politicians rallied in support of dairy producers and ignored struggling consumers. U.S. politicians do the same to protect sugar and soybeans, and put up barriers to lower-cost Canadian softwood lumber.
One Canadian politician who called out the dairy lobby was Quebec MP Bernier. The dairy lobby responded by helping to defeat his bid for the leadership of the Conservative Party. Bernier narrowly lost to an industry-pliant candidate (Andrew Scheer) because of a surge of new delegates from dairy regions in Quebec. Bernier has since started a new party premised on breaking up the dairy cartel and others such as wireless telecommunications.
Canadians are finally starting to notice how perniciousness governments do industry’s dirty work.
Sometimes, in the rough and tumble of politics, progress can be made for the consumer. Without meaning to, Trump may have achieved that.
And Trudeau was smart enough to – albeit unwillingly – let Trump help Canadian families.
Patrick Luciani is senior fellow at the Atlantic Institute for Market Studies. Owen Lippert is a public policy adviser in Toronto.