Lying near the top of Lyle Vanclief’s in basket this week is a report which effectively moves the contentious issue of butteroil imports from the bureaucratic to the political realm.
And the federal agriculture minister will find that whatever decision he takes, one or more factions in the dairy industry will be outraged.
Dairy farmers want the imports subject to tariffs because they displace Canadian cream in ice cream manufacturing. Importers want the product because it is cheaper.
With a report from the Canadian International Trade Tribunal July 3 suggesting options and confirming that no matter what the decision, there will be a cost, pressure will grow on Vanclief to make a decision.
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“There is a strong argument for maintaining the status quo and allowing the imports,” said Kempton Matte, president of the National Dairy Council of Canada representing the processors, in a July 6 interview. “If he rejects that because of politics, he will be in trouble with us and other users of the product.”
If he took that advice, the minister would be in trouble with the dairy farmer lobby.
“We certainly reject the status quo and will be urging the government to act quickly,” Dairy Farmers of Canada vice-president John Core said in a July 6 interview from Lethbridge where the DFC annual meeting is under way.
But he complained that the seven months the CITT process took did little to advance the issue.
“I think it is fair to say that none of the options offered were unknown last December when the minister referred this to the CITT,” said Core. “So here we are, seven months later, back where we started. And the imports have continued.”
At the core of the dispute is a Revenue Canada decision to allow some ice cream makers to import a 49/51 butteroil/sugar blend tariff-free. It displaces Canadian cream and dairy butterfat.
The CITT report said the imports cost dairy farmers as much as $30.9 million last year and that cost could more than double if imports increase as expected. It also noted this is a small portion of the $3.8 billion in annual dairy farm revenues.
Dairy Farmers of Canada have insisted the government reclassify the product as a dairy substitute which should be subject to high import tariffs.
The industry, supported by federal bureaucrats, argued before the tribunal that such action would violate trade agreements and bring on retaliation.
In its report, the CITT rejected the DFC call for a unilateral tariff reclassification.
It said the government’s options include an appeal of the classification to the CITT, government compensation to farmers, negotiation of a special lower-price domestic milk class for ice cream makers or maintaining the current import situation with no action.
Core said the dairy farmer lobby is considering asking the government to have the deputy minister of revenue refer the issue of the butteroil/sugar blend classification to the CITT for hearings. It would ask if the current tariff-free classification is appropriate.
“That is where we are leaning right now,” he said. “That would allow the government to set a deadline.”
The farmer lobby in the past has opposed such an appeal, arguing it would be too time-consuming.
But the DFC vice-president said it may be the most attractive of the options offered.
Matte, on the other hand, said the industry will use the CITT report to pressure the government to allow imports to continue.
“Dairy farmers could fix this by negotiating a competitive price on their product but if they refuse to do this, my reading of the report is that the status quo would be the best option,” he said.
