Andrew Novakovic, professor in the Dyson School of Applied Economics and Management at Cornell University says the Trans-Pacific Partnership represents a new opportunity for the U.S. to develop marketing relationships with Canadian processing and marketing companies, but at a high cost for Canadian farmers.
Novakovic says:
“The outlines of the dairy agreement contained in Trans-Pacific Partnership is distinguished not so much by what it did, but rather that it managed to do anything at all. The participants in the trade agreement include the two most protectionist dairy sectors in the world and, arguably, the two most liberal. The U.S. occupies an intermediary position that was very protectionist 20 years ago, and has become more liberal and more self-assured in world trade. “The breakthrough for the dairy chapter was a Canadian agreement, under heavy U.S. lobbying, to expose their closed system to slightly greater imports, which they cleverly will do within their production quota system. Under the Canadian system, not only has the trade door been closed, they have tightly managed milk production to essentially assure stable and profitable prices for dairy farmers. The accumulated effect has been a Canadian dairy industry that in many respects resembles U.S. farming of 40 years ago and prices that are increasingly higher.
“From 1991 through 2000, Canadian farm milk prices averaged 18 percent higher than the U.S. Since 2000, they have averaged 62 percent higher. Profitability in Canada is more stable than the U.S., but not dramatically higher. The implication is that the supply-managed system has, over time, allowed increased costs to be rewarded with increased prices. Eliminating the protection of the Canadian cocoon is a frightful prospect for Canadian farmers and an alluring opportunity for world exporters, including New Zealand and the U.S. “Although Canada apparently has agreed to only permit an amount of dairy product imports equal to 3.25 percent of its total milk supply, this represents a brand new opportunity for the U.S. to develop marketing relationships with Canadian processing and marketing companies and the confidence of Canadian consumers. This opportunity will be available to any dairy firm in the U.S., but it will be especially enticing to border states, like New York. As a beginning, it is assuredly modest, but what is terribly important is that it is a beginning.”
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