Nothing new in US NAFTA position: Class 7 will be at the core of any deal

That's good and bad news, but at least we know what the US wants

The U.S. Secretary of Agriculture was warmly received when he appeared at the Southeastern United States-Canadian Provinces Alliance conference June 5, 2017. He and former Quebec premier and senior federal cabinet minister Jean Charest held a “fireside chat” about the formation of the group. | Ed White photo

U.S. Secretary of Agriculture Sonny Perdue has been remarkably consistent about his country’s main agricultural concern – and demand – with Canada that it wants dealt with in a new NAFTA:

Class 7 milk has shut off a growing market for U.S. dairy exports, and it has led to an increase of Canadian exports into an already glutted market.

He said this on the weekend.

He said it a couple of weeks ago in Iowa.

He said it to me, directly and clearly, in June 2017. Here’s one of the stories I wrote about it.

Perdue has been clear, again and again, that the U.S. isn’t trying to eliminate supply management. It’s the situation with Class 7 that has raised the ire of U.S. dairy farmers, and that has drawn the wrath of U.S. President Donald Trump and created what still appears to be the primary stumbling block towards a new NAFTA deal.

In a way that’s good. We know exactly what the U.S. wants. Whatever Trump fulminates about today, which changes, Perdue has been clear about the real underlying issue.

In a way it’s bad, especially for dairy farmers, because the creation of Class 7 had offered the increasingly pressured dairy industry the hopes that its growing problems could be dealt with. Class 7 was allowing farmers and the industry to move excess milk protein and avoid the price-crushing gluts that were building as butterfat demand and values far outstripped the demand and value of protein. If Class 7 gets dealt away, that hope for a return to long term sustainability seems dashed.

I wrote about this issue in this week’s paper in my weekly Hedge Row column.

If there’s a NAFTA deal, I can’t imagine that it won’t include restrictions on Class 7. Perhaps it won’t be a total elimination, but a combination of offering the U.S. a bigger overall tariff-free dairy access to Canada plus a pledge to not export anything beyond the minimal amounts occurring before Class 7 was created.

But unless Trump just suddenly drops his clear desire to be able to claim a victory on behalf of Wisconsin dairy farmers, and Perdue simply stops caring about the issue, it’s hard to imagine NAFTA getting resolved without this being at the core of the deal. It’s what they’ve always said.

 

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