New U.S. Canada dairy deal ‘sensible,’ but won’t make big splash for industry
October 5, 2018
The United States and Canada reached a last-minute deal to salvage the North American Free Trade Agreement on Sunday, overcoming deep divisions to keep the 25-year-old trilateral pact intact. As part of the deal, Canada will ease protections on its dairy market and provide access that is greater than what the United States would have gained through the Trans-Pacific Partnership.
Andrew Novakovic is a professor in Cornell University’s College of Agriculture and Life Science’s Dyson School of Applied Economics and Management, whose research focuses on the U.S. dairy industry and federal policy related to dairy, other agriculture and food.
“In my humble opinion, this is a sensible deal with positive outcomes for both sides. By the same token, this deal will not have remarkable consequences for the dairy industry on either side of the border. Although it provides some uplift to U.S. prices and certainly takes a big uncertainty off the table, the reasons for low milk prices today and in 2019 are broader than this.
“Under the new system the cost of milk used to make the products that Canada previously excluded from the U.S. will be roughly the same, so any competitive advantage will derive from transportation, lower costs of processing, better product reputation, account servicing and all the other things that go into making a sale. Perhaps the biggest plus for Canadian farmers is that we have more or less legitimized that they can sell products on world markets by using a low price in their otherwise high price system.”