4. Canada’s New Dairy Obligations Under USMCA and the Associated Implications for Canadian Dairy Producers and Processors

While Canada had largely succeeded in exempting its dairy industry from the general obligations under the North American Free Trade Agreement (NAFTA), the United States–Mexico–Canada Agreement (USMCA) includes new provisions affecting Canada–US trade in dairy products. The Canadian dairy sector was at the heart of the American demands in NAFTA’s renegotiation. For Donald Trump, Canadian dairy regulations were responsible for the loss of jobs and revenues in the US dairy industry. Article 3.A.3 of the USMCA provides for four new obligations, essentially incumbent on Canada regarding dairy products: (1) it grants new market shares to US dairy producers, creating a loophole in the Canadian supply management system; (2) abolishes milk classes 6 and 7; (3) quantitatively caps Canadian exports of certain products around the world; and (4) imposes considerable transparency obligations. These new obligations will have a significant impact on how Canadian dairy producers will be able to dispose of their surplus solids non-fat on markets and on the production of cream-based dairy products in Canada. The entry into force of the USMCA represents a major reorganization for the Canadian dairy industry, not only for production, processing and marketing, but also in terms of systematic data collection in order to meet transparency obligations.