Trump's Trade Wars Have Mobilized Canada's Dairy Cartel

The protectionist impulses of America's northern neighbor are rising to the top.



With a trade war in its early stages against China, the election of a left-wing populist in Mexico, and several new cases against trading partners in the World Trade Organization (WTO), there aren't a lot of reasons to be optimistic about the state of free trade in the United States. Unfortunately, the outlook in Canada is no better. Negotiations on NAFTA have been at a standstill since the Trump administration demanded that Canada accept a sunset clause to the agreement and abandon its unfair trade policies that protect its dairy industry, often referred to as supply management.

Trump is right to call out Canada's trade policies on dairy. But he neglects to mention the trade-distorting subsidies that the United States grants to its own dairy farmers. In 2015, U.S. dairy farmers received $22.2 billion in direct and indirect subsidies, according to a report commissioned by the Dairy Farmers of Canada. In other words, there are people to blame on "both sides".

Hypocrisy aside, Canada's supply management system for dairy is particularly and notoriously isolated from competitive pressures. Coveted quotas (valued at a total of $32 billion in Canadian dollars) are sold to a limited set of dairy farmers by the Canadian government, prices are set at a guaranteed minimum rate by provincial marketing boards, and tariffs on dairy products are so prohibitively high that they effectively bar all dairy imports from the United States and the rest of the world. Canadians pay a high price for this system. Milk and cheese are much more expensive in Canada than in the U.S., and the premium that Canadian consumers pay for these products is transferred to only a fraction of dairy producers: 16,000 quota-holders, most of whom are from Quebec. It's redistribution from the many to the well-connected few.

Prime Minister Justin Trudeau has pushed back against Trump's demands—most notably at the G7 summit which resulted in a top Trump advisor saying that Trudeau deserves a "special place in hell" for using an international platform to deliver a message for domestic consumption. But Trudeau's posturing to maintain supply management is earning him support among voters, and that has given him a stronger hand domestically to continue negotiations on NAFTA.

Posturing against reforming supply management is also a tenet of the Conservative Party—the party that is currently the Official Opposition in Parliament. Shortly after Trump's flurry of tweets attacking Canadian dairy policies, Opposition Leader Andrew Scheer sidelined the only outspoken critic of supply management, Member of Parliament for Beauce Maxime Bernier. Last year, Bernier was narrowly defeated in the Conservative Party leadership race against Scheer, largely due to the latter's support from the politically powerful dairy lobby.

Bernier ran on a libertarian-leaning platform that included policies such as getting the federal government out of healthcare and ending corporate welfare. The latter policy included questioning the efficacy of supply management, the sacred cow of Canadian politics. Scheer continues to face pressure from fellow Conservative MPs to further isolate Bernier by kicking him out of the Conservative caucus. Bernier is being ostracized by the Conservative Party for daring to articulate the party's supposed principles.

There's a cultural explanation for the unflinching impulse to defend supply management. It comes from a longstanding sensitivity about maintaining a Canadian identity that is independent from the economic and cultural leviathan to the south. This sensitivity has also manifested itself in the form of cultural protectionism for creative industries under the regulatory authority of the Canadian Radio-television and Telecommunications Commission (CRTC), where quotas for Canadian content are required for broadcasters. Former Prime Minister, and father of Justin, Pierre Trudeau (1919–2000) once said of the United States: "Living next to you is in some ways like sleeping with an elephant. No matter how friendly and even-tempered the beast, one is affected by every twitch and grunt." When NBC's Chuck Todd confronted the younger Trudeau with his father's analogy, Trudeau responded by likening Canada to a moose—strong, stubborn, yet acutely aware that it is massively outweighed by the elephant.

The bipartisan show of support for Canada's dairy cartel has shown that the national debate surrounding supply management is even less centered on the economic arguments of consumer choice and protected industries than it was before Trump's rhetoric. The conversation is now about whether or not Canada is surrendering to a bully, and no politician wants to be maligned as a trade-defeatist in an effort to let milk flow freely—especially with elections on the horizon in 2019.

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  1. Trump is right to call out Canada’s trade policies on dairy. But he neglects to mention the trade-distorting subsidies that the United States grants to its own dairy farmers

    What do Canadian tariffs on American milk have to do with internal subsidies that AREN’T American tariffs on Canadian milk?

    1. I don’t get it either. I don’t like it because subsidies are usually a mistake…but in a piece about trade, this seems utterly pointless.

      1. How did you miss the opportunity to write “udderly”?

        1. I’ll claim my respect for boobies blocks such frivolity. 🙂

    2. Exactly, I have TDS about as much as the next guy, but i really don’t think it took Donald Trump to mobilize the dairy farmers of Canada.

      It took a while, but I’m pretty sure there aren’t any more provinces where you have to buy your margarine with a yellow dye packet in it, but I’m pretty sure that Canadian dairy farmers get all of the same sweet protectionism and subsidies that ours do.

    3. The taxpayer subsidy given to US dairy farmers means they can sell milk at a lower price making Canadian milk appear to be more expensive in the US and thus has the same effect of limiting how much Canadian milk comes into the US as a tariff would. It also means US farmers can sell their milk in Canada at a lower price which is what the Canadian tariff tries to correct. Either way both sides get screwed because the tax funded US subsidy and the Canadian tariff both distort the real price of milk and limit competition which only serves to raise the price.

      1. Either way both sides get screwed because the tax funded US subsidy and the Canadian tariff both distort the real price of milk and limit competition which only serves to raise the price.

        You appear totally unaware that the Canadian market operates under a government supply management system. Somewhat similar to New York City’s taxi medallions. To sell milk in Canada you have to buy quotas making entering the market virtually impossible for a young farmer. In essence, the market is a monopoly for existing farmers.

  2. Just put a tariff on plastic bags.

    1. Or a tariff on tariffs.

  3. So Canada does not trade freely in dairy products due to their love of protectionism and cultural insecurity? Supposedly Trump has made it worse, but how was not calling the Canadian government on it working to change their policy?

  4. While I appreciate the humor in the subhed, it’s unfortunate that it suggests the protectionists are the delicious cream. Or is Haynes some kind of dastardly proponent of skim milk?

  5. Don’t we have all kinds of barriers to interstate transport of milk?

    I am surprised that international transport is a thing.

    And it is pretty routine to account for subsidies in trade disputes. Trade disputes are inherently about “unfair competition.” So, whether the foreign is taxed, or the domestic is subsidized, the dispute is the same.

    1. Milk doesn’t tend to cross state lines, much less international borders, but cheese does. (The good kind, not “processed cheese food.”)

      Nobody drinks milk anyway. Like Arnold said many years ago, “Milk is for babies. I drink beer!” But everyone who has a developed palate can appreciate some nice aged cheese.

  6. Like I’ve said several times before, almost nobody in the world really believes in free trade.

    Most of the world is quite good at coming up with rationalizations and excuses to protect their own markets, and Canada’s favorite rationalization seems to be “we have a big mean cultural bully to the south of us and we don’t want to be like them!”

    1. Canada has been very trade protectionist since long before Twitter was even a thing.

    2. Softwood lumber dispute.

      The Canada?U.S. softwood lumber dispute is one of the largest and most enduring trade disputes between both nations.[1] This conflict arose in 1982 and its effects are still seen today. British Columbia, the major Canadian exporter of softwood lumber to the United States, was most affected, reporting losses of 9,494 direct and indirect jobs between 2004 and 2009.[2]

      The heart of the dispute is the claim that the Canadian lumber industry is unfairly subsidized by federal and provincial governments, as most timber in Canada is owned by the provincial governments. The prices charged to harvest the timber (stumpage fee) are set administratively, rather than through the competitive marketplace, the norm in the United States. In the United States, softwood lumber lots are privately owned, and the owners form an effective political lobby. The United States claims that the Canadian arrangement constitutes an unfair subsidy, and is thus subject to U.S. trade remedy laws, where foreign trade benefiting from subsidies can be subject to a countervailing duty tariff, to offset the subsidy and bring the price of the commodity back up to market rates.

      1. BTW: “Softwood” was never my nickname ever.

  7. This is unrelenting bullshit.

    The US Dairy Industry has price SUPPORTS not subsidies. We produce lost of excess milk that we then dump or make into crappy cheese that eventually gets destroyed to RAISE milk prices. Then on top of our artificially raised prices Canada puts huge tariffs.

    I am not in favor of the price supports, but for damn sure there is no “subsidy” that lowers milk prices.

    1. Price supports were repealed in the 2014 farm bill.

  8. The people of Letterkenny are mad as hell…

  9. Fun fact: the leader of Canada’s Libertarian Party, who is an all-around really nice guy, recently offered to step aside as the head of the party if Max Bernier, a Conservative Party member, wanted to take his place and switch parties. Bernier is pretty much a straight-down-the-line libertarian anyway, and he had been shafted by his fellow conservatives.

    Putting an end to dairy price supports is a central issue for both of these guys.

  10. Trump’s Trade Wars Have Mobilized Canada’s Dairy Cartel

    So the Canadian Milk group is named like the Cartels of Central and South America?

  11. 1) I wish Bernier was the leader.
    2) Trudeau is a ham.
    3) Canada is but a nation of monopolies and cartels. The dairy cartel is especially odious.

    This is what they’re protecting. And they act like hoodlums too. You should see the territorial fights they have.

    It’s like watching a bunch of hares with lobotomies.


  13. The root cause of all these kerfuffles is the expansion of government. When government was small and you could mostly ignore it, other than paying taxes and leaving assault, theft and murder to the government, people ignored politics in their daily life. But the more government interferes in daily life, the more people have to pay attention to politics, at least to the point of getting aggravated at its shenanigans.

    It’s not that people actually expect to change government by throwing tantrums and rioting in the name of peace, or shouting people down in the name of free speech. But government is no fun to deal with. It is arbitrary, capricious, full of forms to fill out and bureaucrats to obey, and it gets frustrating. Why would not people lash out in frustration.

    I can’t predict how it will end. It can’t just get worse and worse; it will blow up before then. But how can it be reined in without revolution? Revolution is no more likely than recognition of it being too big. People have too much at stake and aren’t interested in giving up what they can get in the hope that everyone else will similarly decline government largess.

    It’s just a stagnating frustrating mess.

  14. I don’t care what Canada does. The US should end all tariffs and subsidies. Trump is clueless when it comes to trade. Subsidies are wealth redistributions and tariffs are taxes on consumers.

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  16. In other words, there are people to blame on “both sides”, writes Evan Haynes

    For once the tired old Reason mantra is used correctly.

  17. This is why I only drink Human milk

    1. “my milkshake brings all the boys to the yard”

  18. The Sub Headlines are always such bullshit.

    It’s Trump’s Trade War when Canadian Dairy is massively protected. And they weren’t mobilized before. Oh no. Their protection was put into effect by the Canadian Shoe Industry. The Dairy Cartel had nothing to do with it.

    “Trump’s Trade Wars Have Mobilized Canada’s Dairy Cartel”

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