Dairy farmers last week received a blunt warning from Canada’s chief agricultural trade negotiator that they must prepare to compete with more cheap imports.
They should use the lull in World Trade Organization talks to prepare for an inevitable increase in competition.
“We need, all of us, to look at what kind of measures we can take to get ready,” Steve Verheul told the annual policy conference of Dairy Farmers of Canada Feb. 5. “One thing is to move to a more flexible pricing system.”
While WTO talks are now in limbo until summer when Indian elections will be over and the new United States administration gets its trade bearings, he said there likely will be a push later this year to make progress in negotiations that started in 2001.
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Any movement toward a settlement would not be good for Canada’s protected dairy industry.
Verheul said Canada is alone in opposing a minimum 23 percent cut in over-quota tariffs that protect the dairy industry now with tariffs as high as 300 percent.
“I never had the view we could absorb a 23 percent tariff cut,” he said.
Under any deal, guaranteed minimum access by imported products would more than double.
Meanwhile, falling world dairy prices already have put the Canadian system at risk from cheaper imports, which could disrupt the domestic market.
Verheul told DFC delegates that a less rigid cost-of-production based pricing system will be needed to adjust domestic prices to meet import competition without undermining the entire supply managed system.
He made it clear any WTO deal will cost Canadian dairy farmers market share or revenue as imports increase.
Despite an assurance during the meeting from agriculture minister Gerry Ritz that the government will continue to defend supply management at trade talks, some key players in the dairy lobby said they expect the worst if a WTO deal is reached.
Marcel Groleau, chair of Quebec dairy farmers, said Canada cannot win at WTO for his industry and should pull out of agricultural negotiations.
“I no longer believe in the negotiations,” he told Verheul. “You negotiators are living in a bubble, not connected to the people you will affect. There is a vacuum between the negotiations and the people.”
DFC president Jacques Laforge conceded a WTO deal would be bad news when he said he hoped Verheul would continue to report that WTO talks are stalled.
“I hope you are back for the next four or five years with the same message. You will be welcome.”
When he spoke to the conference before Verheul, Ritz said the government continues to fight for supply management.
