Canada's Dairy Dilemma: Accusations of Dumping and the Economic, Environmental Costs

Canada's dairy industry is facing mounting criticism from rival exporters, who accuse the country of dumping dairy products on the global market. This practice, they argue, is distorting international trade and harming the competitiveness of other dairy-producing nations. But what are the economic and environmental consequences of these accusations, and how is Canada responding?



The accusations against Canada center around various dairy products, including milk, cheese, powders, yogurt, and even ice cream. Estimates suggest that between 6.8 billion and 10 billion liters of milk have been wasted between 2012 and 2021, valued at up to $14.9 billion CAD. This wasted milk could have fed 4.2 million people annually. The environmental consequences are also substantial, with the production of this wasted milk consuming approximately 920 to 1,900 square kilometers of arable land and between 930 million to 1.9 billion cubic meters of water over 10 years. Additionally, the emissions from producing the wasted milk amount to 8.4 million tonnes of CO2-equivalent, which is equivalent to adding 330,000 cars to the transportation grid.

These accusations have significant implications for Canada's trade relations with rival exporters, particularly the United States. The U.S. has repeatedly filed complaints about Canada's dairy market protectionism and supply management system, arguing that it violates trade agreements like CUSMA (formerly known as NAFTA) and the CPTPP. In May 2022, the U.S. requested a new dispute settlement consultation with Canada under CUSMA regarding Canada's dairy tariff-rate quota (TRQ) allocation measures. This was the second time the U.S. had requested public consultations on this issue.

An international coalition of dairy organizations, representing the U.S., Australia, European Union, New Zealand, Mexico, and Argentina, has called for trade representatives from their governments to intercede in the matter. They argue that Canada's new national milk Class 7 pricing policy and Ontario's Class 6 policy artificially reduce prices of domestic milk ingredients and undercut competitors' dairy prices in the international market.

Canada's dairy export policies have led to a significant increase in exports of skim milk powder, which has contributed to the already swelling global supply of milk protein. This has resulted in the cancellation of contracts by Canadian cheesemakers for U.S.-sourced ultrafiltered milk, further straining trade relations.

In response to these accusations, Canada maintains that its dairy policies are in line with international trade obligations and that the system is designed to balance supply and demand. However, critics argue that the rigid structure of supply management is contributing to inefficiencies and waste, as evidenced by the recent revelations of milk dumping.

To address these concerns, a study by Sylvain Charlebois and colleagues recommends mandatory reporting of surplus milk production and waste to increase industry transparency, adjusting quotas to prevent overproduction, and imposing penalties for overproduction. These reforms could help mitigate the economic and environmental consequences of milk dumping in Canada and improve the competitiveness of the dairy industry on a global scale.

In conclusion, the accusations of Canada dumping dairy products have significant economic and environmental consequences, as well as implications for Canada's trade relations with rival exporters. While Canada maintains that its dairy policies are in line with international trade obligations, critics argue that the rigid structure of supply management is contributing to inefficiencies and waste. To address these concerns, reforms such as mandatory reporting, quota adjustments, and penalties for overproduction could help mitigate the economic and environmental consequences of milk dumping in Canada and improve the competitiveness of the dairy industry on a global scale.