CUSMA has been in force since July 2020, American products are entering our markets and dairy farmers are already experiencing severe financial impacts, but there has still been no formal announcement on compensation measures for this Agreement. Of course, many promises have been made since CUSMA was signed in 2018. Now that the Trudeau Government has been reelected, it’s time for it to take action.
Our demands are clear: the Federal Government must pay direct compensation to the farmers, define the conditions of these payments, announce the amounts for each year, and include the total allotted compensation in the next budget. The compensation must cover lost markets, as well as the additional costs of eliminating the milk ingredients class and capping exports.
Let’s remember that the agreement made with the United States and Mexico has severe economic consequences for the dairy sector. First of all, CUSMA provides for additional access of 100,000 tonnes of dairy products, the equivalent of 3.9% of the Canadian market, a volume we were in the position to fill completely through our investments in our farms. Under these quotas, products can enter Canada at any time, disrupting orderly production management. The purpose of supply management is to allow us to balance supply and demand precisely. The unpredictability of imports makes it much more difficult to forecast demand and plan production.
But that’s not all. The changes made to Canada’s dairy policy to comply with CUSMA, the capping of exports of skim milk powder, protein concentrates and infant formula, and the associated penalty, also generate significant additional costs. It’s undeniable that CUSMA has weakened the business environment by creating uncertainty and commercial limits. By accepting the cap of 35,000 tonnes for skim milk powder, the government has greatly restricted our ability to add value to solids non-fat (SNF) on the international markets. It has also forfeited part of Canada’s sovereignty by increasing the obligations of transparency and introducing consultation of the American authorities into our decision-making process. The Federal Government has created obstacles for us by amplifying our SNF surplus problem, also intensified by the consumption trends for fat-rich dairy products, such as cream and butter, and the decline in drinking milk.
Many promises of compensation have been made since CUSMA was signed in 2018. Now that the Trudeau Government has been reelected, it’s time for it to take action.
The entire industry will make efforts to address this structural challenge. The implementation last August of our new on-farm component payment policy is a good example of concrete action. The processors must also contribute by increasing their processing capacity and finding new outlets for SNF. But we can’t get there alone! Major investments are required. We need government assistance. The commitment and support of governments are necessary to ensure our sector’s vitality.
This is especially true given that CUSMA’s negative impacts aren’t the only problems facing producers. There are the consequences of the COVID-19 crisis, the soaring increase in production costs, the instability of milk prices linked to declining world prices, and the other two trade agreements in force, the Canada-European Union Comprehensive Economic and Trade Agreement (CETA), and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which represent $450 million in perpetual average annual losses of farm gate sales. Yes, the compensation program announced by the government for these two Agreements can absorb a portion of the losses, but it won’t restore the market growth we were in a position to fully supply.
Decisions made by the governments over the past few decades have gradually weakened our agricultural model and our production sector. The uncertainty and economic shocks we are experiencing can be attributed to a series of government decisions detrimental to dairy farmers. Our porous borders have caused serious impacts for dairy farmers, through bypassing of border controls for imports of protein concentrates, diafiltered milk and butter oil, to name only a few. So have the market accesses conceded in the WTO agreements and in the three bilateral agreements.
We need stability. We also need a government committed to protecting and maintaining supply management. The government must keep its promise to make no further concessions in any other free trade agreements. This system is effective for our businesses, for Canadian consumers and also for regional economies. Investments and compensation payments are spent locally and benefit our economy and our food autonomy. It should be kept in mind that the dairy industry provides thousands of jobs and millions of dollars in economic spin-offs. The Federal Government has sacrificed our industry too often in recent years. It is now time for it to move from talk to action by giving us the tools we need to ensure our sustainability.
Daniel Gobeil, président
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