Canada's largest dairy processor is voicing an opinion that's probably
unpopular with the nation's farmers: Donald Trump has a point. Canada should
consider eliminating its Class 7 milk policy in order to renegotiate the North
American Free Trade Agreement with the U.S., Saputo Inc. Chief Executive
Officer Lino Saputo Jr. said.
Reuters reports that the policy was rolled out last year and makes it cheaper
for Canadian processors to buy domestic supplies of ultra-filtered milk, a
concentrated ingredient used to boost protein content in cheese and yogurt. It
has also effectively blocked U.S. dairy imports while creating an "incredible
imbalance" on world markets, Saputo said.
"I understand the frustration of the U.S. side and quite frankly I think
they have every reason to be upset," he said Monday in a telephone
interview from Montreal. "In the Nafta negotiations, the elimination of
Class 7 would go a long way in trying to get the dairy file closed."
Saputo's comments come just one week after the U.S. President took aim at
Canada's supply-managed dairy system. As Trump departed the Group of Seven
summit, he skewered Canada's dairy tariffs, which run as high as 270 percent on
some products, labeling them unfair to U.S. farmers. Dairy has emerged as one
of the biggest areas of dispute as trade tensions between the two nations
escalate. Canada has vowed to defend its supply-managed dairy system, which
isn't covered by the current Nafta agreement, during the negotiations.
The uncertainty caused by the trade negotiations has made it difficult for
Saputo Inc. to decide where to deploy capital, Saputo said. While the company
isn't petitioning for Canada to dismantle its supply-managed dairy system,
which controls output by matching with demand through quotas and tariffs, the
country wants to "have its cake and eat it, too" with the Class 7
policy, he said. The system has shut out imports from the U.S. and created more
milk solids in an industry that's already dealing with a glut, he said.