Canada recently changed its policies on ultra-filtered milk, a protein liquid concentrate used to make cheese, to favour domestic suppliers over US producers.
Canada's ambassador to the U.S. David MacNaughton is downplaying any cross-border tension with the United States over dairy tariffs, calling the relationship "terrific" and "a model for the rest of the world".
President Donald Trump ratcheted up his criticism of Canada on Thursday, slamming the country for protectionist measures it has taken with its dairy industry that Trump says have negatively affected U.S. dairy farmers. It had been duty-free since the first NAFTA agreement first took effect in 1994, but the federal government changed the rules after dairy farmers in Ontario complained about prices. US farm groups say that effectively blocks American dairy exports, exacerbating a glut of milk on the American side of the border.
In a joint letter with Wisconsin Gov. Scott Walker, Gov. Andrew Cuomo on Tuesday urged Trump to "address Canada's protectionist dairy trade policies so that they honor their global commitments under NAFTA and other trade agreements". "Or we're going to get rid of NAFTA for once and for all".
"We're not going to let Canada take advantage [of the U.S.]", Trump told the group of reporters, claiming Canadian policies had hurt USA timber and lumber jobs as well. "We're going to have to get to the negotiating table with Canada very, very quickly".
Eight per cent of milk consumed in Canada is imported, he says, compared to less than two per cent in the U.S.
"Diafiltered milk is not being used in the United States", he says.
"Dairy is a very small part of the total trade with Canada, there's an bad lot more that happens even within agriculture than just dairy", said Mark Stephenson, director of Dairy Policy Analysis at the University of Wisconsin-Madison.
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"We feel obligated to help wherever we can", said Vice President Bill Mullins.
On Tuesday, Trump told an audience of dairy farmers in Wisconsin that he would stand up for their livelihoods.
"If Donald Trump adds a Buy American clause in the NAFTA renegotiation, it would be necessary to allow the creation of a Quebec equivalent", said the leader of the Bloc Québécois, Martine Ouellet.
Numerous companies that previously purchased ultra-filtered milk from Cayuga Milk Ingredients and other US producers have made investments to manufacture the product on their own.
"Dairy trade between Canada and the USA massively favours the US, by a ratio of five to one".
"Canada has not taken any broader actions to limit imports from the United States", the letter continues.
Canada's dairy farmers agreed past year to sell milk ingredients used for cheese-making to Canadian processors, who include Saputo Inc and Parmalat Canada Inc [PLTPRC.UL] at prices competitive with worldwide rates. There's also "flat-line growth" in other dairy manufacturing sectors within NY, he added.
Trump did not detail his concerns, but promised his administration would call the Canadian government led by Prime Minister Justin Trudeau and demand an explanation.