Alberta produces and sells the cheapest milk in the country and supply to processing plants is not a problem.
Yet the Parmalat ice cream plant in Calgary uses imported butteroil rather than local cream in its lower-grade ice creams because it is cheaper.
Using the controversial import, brought into Canada in a 49-51 butteroil-sugar blend that circumvents supply management tariffs, gives the company a stronger bottom line on its ice cream sales.
“We use it because the blend is still a lower cost than Alberta butterfat,” said Parmalat executive Bert Lear in testimony last week before the Canadian International Trade Tribunal.
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It was a moment that summed up the stakes in the bitter political debate over imports of the cream substitute, which has been referred to the CITT for a June 30 report.
During the first week of CITT hearings, the debate became a numbers game.
Producers against processors
As the tribunal opened two weeks of hearings into the legality of the imports and the government’s room to act, dairy farmers were pitted against processors and ice cream makers who said it is a cheaper substitute for the higher-priced protected Canadian product.
According to a Revenue Canada tariff ruling, it is a legal import.
Dairy farmers insisted the imports are depriving them of tens of millions of dollars in revenue and quota. They said the government promised in 1993 to use tariffs to protect supply management and it should do so.
An important part of the rural economy is at stake.
“Every one of those dollars is a dollar in the pocket of a milk producer,” said John Core, chair of the Ontario milk marketing board. “Those are dollars which go into rural communities in this country.”
Opens the door
Richard Doyle, executive director of Dairy Farmers of Canada, said if ice cream makers can find a blend that gets around supply management tariffs, it opens a floodgate and sets a precedent.
“Then, your whole price structure is destroyed,” he said.
Dairy processors and ice cream makers insisted that is a political argument and they disputed farmer damage estimates. They said the issue is a legal one and the butteroil-sugar blend was not included when Canada established its tariff protections in 1994.
Besides, in a competitive industry like ice cream, every cost saving counts.
“This is a competitiveness issue,” said National Dairy Council of Canada head Kempton Matte.
To bolster the processor case, an American dairy lobbyist told the CITT that any move to put a tariff on butteroil-sugar blend imports would be met with American retaliation.
A senior official of the Industry Canada competition bureau argued that supply management tariff protections are ultimately doomed and the industry should learn to compete with butteroil imports.
Still, the dairy farmer lobby, which initially boycotted the CITT hearings because it is a political issue and then decided to appear at the last moment, wanted the debate to be political.
They argued the government made a commitment to stop imports of supply management threatening imports such as this blend, although there is no evidence of a specific commitment.
And they insisted dairy farmers cannot afford to lose such a precedent-setting case, opening the door to other processors to find other ways to bypass supply management.
CITT commissioners, who must report with options to the government by June 30, continually tried to bring the debate back to Canada’s trade obligations.
Lawyers for the processors and importers accused the farm representatives of making political speeches when what was required was legal argument.
The hearings end this week.
