Growing signs that World Trade Organization talks will resume with a possible deal by year end is not good news for Canada’s dairy industry.
Canadian agriculture trade negotiator Steve Verheul said last week most negotiators have a good idea what an agreement would look like if governments ever find the political resolve to approve a deal.
It would force Canada to make considerable compromise in its determination not to budge on supply management protections.
Verheul told delegates to the Dairy Farmers of Canada convention that any deal likely will include cuts to over-quota tariffs, since Canada is the only country among 150 WTO members opposed to cuts.
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He said current Geneva thinking is that tariff cuts on sensitive products would be in the 30-35 percent range, which would still leave many supply managed products with over-quota tariffs in the 150–200 percent vicinity.
However, he also noted that some developing countries are supporting a tariff cap of 100 percent.
Verheul said that even at current high levels, Canada’s tariffs sometimes are in danger of being breached by world products so inexpensive they can afford to pay the tariff and still be competitive in the Canadian market.
The son of an Ontario dairy farmer, Verheul said all of those factors and WTO assumptions mean that Canada’s supply management system meant to control imports is under threat.
“If you don’t know what’s coming over the borders, you can’t operate supply management.”
The Canadian negotiator said there is wide support for an increase in guaranteed access for sensitive products at the bottom through tariff rate quota expansion. Canada officially opposes that proposal.
As well, any deal will ban the use of export subsidies and that will effectively end dairy product exports from Canada because the WTO considers those to be subsidized.
Canada is allowed to spend $4.3 billion for domestic supports that are not considered green under WTO rules and $500 million of that is deemed to be the result of regulated pricing for milk, butter and skim milk powder.
If allowable domestic support is cut by 50 percent or more, as many WTO negotiators are suggesting, Canada’s spending limit would be compressed and the gap between domestic dairy prices and world prices also would have to narrow.
“There was little good news there, to say the least,” DFC president Jacques Laforge said after he heard Verheul’s speech.
