Wisconsin dairy farmers benefiting from new trade deal

The new trade deal between the United States, Mexico and Canada is expected to benefit Wisconsin dairy producers, thanks to some last-minute concessions made by Canada.

“The biggest winner from the USMCA will be Wisconsin dairy farmers — a key component of our state’s economy,” said Kurt Bauer, president and CEO of Wisconsin Manufacturers and Commerce.

Wisconsin Farm Bureau Federation President Jim Holte says the agreement is welcomed “with opened arms.”

“This new agreement eliminates aspects of Canada’s dairy program that were being used to undercut U.S. dairy products,” Holte said. He noted U.S. dairy is gaining access to 3.6 percent of Canada’s dairy market through the deal, “greater than what would have been achieved through the Trans-Pacific Partnership.”

“Additionally, the USMCA includes measures to address cooperation, information sharing and other trade rules related to agricultural biotechnology and gene editing,” he added. “This is the first time we are seeing measures like this in a trade agreement.”

Meanwhile, Gov. Scott Walker is calling the new trade deal “a big win for Wisconsin farmers,” as it eliminates “Canada’s protectionist trade policies related to ultra-filtered milk that targeted Wisconsin dairy producers.”

The new United States-Mexico-Canada Trade Agreement was announced late Sunday night after Canada decided to join the United States and Mexico in their previously announced agreement. That decision followed more than a year of negotiations, and came in just a few hours before an agreed-upon midnight deadline.

A fact sheet from the office of the United States Trade Representative lists 10 key achievements of the new USMCA deal, including expanded market access for U.S. food and agriculture products, elimination of certain Canadian milk classifications, and new protections for proprietary food formulas.

U.S. Rep. Ron Kind calls the deal a “step forward in this process,” but says “now it’s time for us to come together to discuss the outstanding issues that remain.”

“Not only should we demand the highest possible labor and environmental standards, but ensure they are fully enforceable — a standard which many of our past trade agreements have not met,” said Kind, D-La Crosse.

The American Dairy Coalition says getting rid of Canada’s “Class 7” milk pricing system opens up the Canadian dairy market to more U.S. sellers. That was a “major point of contention” in trade talks, according to Laurie Fischer, CEO for the ADC.

“The program saturated the international market with subsidized skim milk powder and cut the demand from Canadian cheese makers for ultra-filtered milk from the U.S.,” Fischer said. “USMCA will include the development of new safeguards to prevent major export increases for certain dairy products.”

Warren Graeff, agriculture banking market manager for PNC Bank, says “ultimately the news appears friendly to the U.S. dairy industry.” PNC has about 2,600 branches spread across 19 states, including several in Madison and Milwaukee.  

Graeff explains that increased access to the Canadian market comes through tariff rate quotas, phased in over a 19-year period.

“For instance, it looks like the US will be able to ship 2,084 metric tons of cheese to Canada tariff free in the first year the agreement is in force with half the cheese being for industrial use and half for retail,” he said.

Graeff says U.S. dairy futures are “mostly steady to firm,” but he notes “there was no major market move” after the news.

“Although it’s debatable as to how much impact trade wars and tariffs have on US dairy markets, after having spent the better part of the last 12 months seemingly rolling back global trade the USMCA is absolutely seen as a step in the right direction for the US global dairy trade,” Graeff added.

Although the deal did prevent some potential tariffs from being enacted on Canada, it doesn’t eliminate the 25 percent tariffs on steel and 10 percent on aluminum from either Canada or Mexico.

The effects of the new trade agreement won’t be felt until at least next year. Leaders from all three countries have to sign it, and then Congress and the legislatures of Canada and Mexico will need to give final approval.

–By Alex Moe