Ottawa vows ‘long-term solution’ to rising U.S. imports of milk protein

Ottawa says it is committed to finding a “long-term solution” to surging U.S. imports of milk protein that farmers blame for sapping their incomes.

Agriculture Minister Lawrence MacAulay [has] promised to consult with farmers and processors in the coming weeks to deal with the problem of so-called diafiltered milk, triggering a potential trade showdown with the United States...

But the Liberals voted against an NDP motion Tuesday calling on the government to enforce federal rules that set a minimum threshold on how much Canadian milk must be in cheese. The motion, also supported by Conservatives, was defeated.

It isn’t clear what Ottawa can do to limit U.S. imports of the highly concentrated liquid milk protein, which is used to make cheese and other dairy products. U.S. dairy suppliers and their backers in Congress have warned they will challenge any efforts by Canada to restrict their right to sell milk protein here.

The product is legally imported into Canada duty-free from the United States under North American free-trade rules. Most Canadian dairy processors – including those owned by farmers – import protein and use it as an ingredient because it’s cheaper and more efficient than industrial milk in the making of cheese, yogurt and milk-based drinks.

The product has created a growing breach in the massive tariff wall that protects the Canadian dairy industry. Milk protein imports reached nearly $200-million last year, up from virtually nothing in the mid-2000s. The Dairy Farmers of Canada says it cost farmers more than $230-million in lost revenue last year...

Another thorny problem is that diafiltered milk isn’t a product that’s recognized in international trade rules. It’s a process in the making of cheese. And it’s unclear whether enforcing the cheese compositional standards would make a significant dent in protein imports.

This has been excerpted from the 3 May 2016 edition of The Globe and Mail.