Trump usually rails in opposition to Canada’s prohibitively excessive dairy tariffs. He’s about to get angrier.
That’s as a result of last week, the Canadian Senate handed new legislation, years within the making, which bars the federal government from negotiating away its dairy protectionism in future commerce agreements.
The invoice’s timing was no accident. Canada needs a carve-out from Trump’s tariffs and hopes to resume the United States-Mexico-Canada Agreement subsequent summer time. Trump will demand rather a lot from Ottawa in alternate. Concessions on Canada’s tariff-rate quotas on dairy will probably be at or close to the highest of the checklist.
Canada’s new invoice takes these tariff-rate quotas off the desk. That is misguided. Not simply because it would frustrate the U.S. and different commerce companions, but in addition as a result of provide administration isn’t in Canada’s nationwide curiosity.
A variety of ink has been spilled attempting to make sense of supply management. The system, which dates to the Nineteen Seventies, units provincial quotas, establishes minimal costs and imposes steep tariffs.
Proponents argue it stabilizes costs and farm incomes. Critics say it leads to higher prices for Canadians, stifles business innovation in agriculture and has prompted severe commerce tensions lengthy earlier than Trump.
Each side agree on one thing: Provide administration is the third rail of Canadian politics.
That’s as a result of the system’s quotas largely benefit dairy farmers in Quebec and Ontario. Since these provinces are important to successful federal elections, Canada’s political events are loath to the touch provide administration.
However Trump’s tariffs have given Canadian elected officers the political cowl wanted to shake up provide administration. Beneath the cloud of unprecedented commerce coverage uncertainty, massive questions loom in regards to the nation’s financial future. It’s a second of nation-building. It’s a time of seriousness.
As an alternative of rising to the event, the Home of Commons unanimously authorised its protectionist dairy invoice.
What comes subsequent? The writing is on the wall. Trump has raged in opposition to Canada’s dairy tariffs for years. He vowed that the USMCA would sort things, but it surely gave Canada 14 tariff-rate quotas on merchandise from milk to cheese and butter which have additional sophisticated issues.
Canada’s tariff-rate quotas give U.S. dairy farmers tariff-free entry on as much as, say, 50 million metric tons, for instance, however then topic them to punitive tariffs for something greater than this. The charges, ranging from 241 p.c on milk to 298 p.c on butter, are those that Trump likes to speak about.
However U.S. dairy farmers aren’t truly paying these exorbitant charges as a result of they’ve never exceeded the quotas. Which invitations the all-important query: Why?
The Biden administration argued that Canada’s quotas favor home “processors” of dairy merchandise, in addition to so-called “additional processors” that use dairy as inputs utilized by different merchandise. This retains high-value-added U.S. exports value lots of of tens of millions of {dollars} out of the Canadian market.
In 2021, the U.S. brought a case in opposition to Canada’s tariff-rate quotas below the USMCA and gained. In a second case, nevertheless, Canada was deemed to be in compliance with its obligations. This ruling frustrated the Biden administration. Now, Trump needs to use tariffs to make issues proper.
The U.S. isn’t alone in complaining about Canada’s dairy tariff-rate quotas. Simply Final yr, New Zealand filed a similar case in opposition to Ottawa below the Complete and Progressive Trans-Pacific Partnership. The U.S. and New Zealand have additionally sued Canada over its tariff-rate quotas on the World Commerce Group.
Given this, it ought to hardly be shocking that there’s home opposition to the invoice.
The Canadian Cattle Affiliation called it “dangerous commerce coverage.” The Canadian Agri-Meals Commerce Alliance said it was “a flawed piece of laws that units a troubling precedent, undermining Canada’s longstanding dedication to the rules-based worldwide buying and selling system.”
Trump’s tariffs impressed Canada to take daring steps to take away inter-provincial trade barriers, regardless of age-old political hurdles. Getting out from below the nation’s provide administration ought to have been prioritized with the identical degree of urgency and dedication to artistic problem-solving.
Canada’s new dairy protectionism invoice isn’t that.
Marc L. Busch is the Karl F. Landegger Professor of Worldwide Enterprise Diplomacy on the Walsh Faculty of International Service, Georgetown College.