Milk regulations in Canada mean that there's another border the President is concerned with

By Matthew Kassel
February 07, 2018
Photo via Getty Images

“Canada has made business for our dairy farmers in Wisconsin and other border states very difficult. We will not stand for this. Watch!” So tweeted Donald Trump, just this morning, in another digital eructation that could end up causing more harm than good. But the president’s Canada remark—his third hit against the country in the past week—isn’t coming out of nowhere. (Set aside the fact, as many have pointed out, that Wisconsin isn’t a border state.) Though the dairy farmers issue is arcane, it’s worth understanding on a more granular level as Trump seeks to renegotiate the terms of NAFTA, a move that could have far-reaching consequences that go beyond the dairy industry.

The issue Trump is referring to has to do with a subset of milk protein concentrate used to increase cheese yields. Ultra-filtered milk is a relatively new substance that was developed after the terms of NAFTA were negotiated, so there aren’t concrete rules for how to deal with it in trade. There are at least three plants in the United States (one in Wisconsin and two in New York) that make ultra-filtered milk and send it to Canada, which last year imported about $100 million in ultra-filtered milk from the United States, according to the USDA.

But in February, Canada instituted a new pricing policy that made it cheaper for milk buyers in Canada to purchase their milk domestically, obviating the need for U.S. shipments. This caused a pretty damaging ripple effect in the dairy business that has probably hit farmers the hardest since some of them relied exclusively on selling their raw milk to be made into ultra-filtered milk.

One plant in Greenwood, Wisconsin, called Grassland, recently mailed cancellation letters to 58 Wisconsin farmers (others were in Minnesota), telling them that they would no longer need their services as of May 1, which gives the issue an added sense of urgency as farmers scramble to find new business before the deadline. Experts have speculated that Canada’s new pricing policy—not a tax as some have suggested; it’s better described as a non-tariff barrier—may violate NAFTA rules and perhaps WTO regulations, but that remains to be seen.

In the meantime, about 40 farmers let go by Grassland still need to find a new processor, according to Daniel Smith, an administrator in the Wisconsin Department of Agriculture, and the clock is ticking—especially for Trump, who promised to revive heartland jobs during the election.