Canadian dairy farmers could face a bigger-than-expected flood of cheap foreign imports, the final version of the proposed trade agreement known as Trans-Pacific Partnership shows.
The full text of the pact released on Thursday morning shows that dairy imports will be far greater than expected by just year five of the multiyear deal, once yogurt and cheese and other processed goods are included, said Sylvain Charlebois, a Guelph University business professor who specializes in food.
The government said when it released a summary of the proposed agreement in early October that foreign dairy producers would have access to 3.25 per cent of the Canadian market. The move, lamented by dairy producers, was softened by the announcement of $4.3-billion in federal subsidies to compensate farmers for lost income and reduced quota values.
"I don't come up with the same number the government did," Prof. Charlebois said by phone. "I come up with way more than 4 per cent."
Coupled with the 2-per-cent market-share loss expected when Canada reaches a free-trade deal with Europe, Canadian dairy farmers will see a "significant" drop in demand for their milk, he said.
"The fundamental principle of supply management is to produce what we need. But by allowing an extra 6 per cent into our market, we're going to have to do something with the excess. And it's only going to grow," Prof. Charlebois said.
Al Mussell, a researcher at Guelph-based Agri-Food Economic Systems, called the volumes of tariff-free imports of skim milk powders, a key food additive and raw material for food processors makers, "quite significant." Volumes will reach 11,000 tonnes by year 19 of the deal, compared with recent imports of 9,000 tonnes.
Given 85 per cent of the tariff-reduced dairy products are destined for food processors, it is unlikely consumers will see any benefit, Mr. Mussell said.
"By the time you work it down to the retail level, I wouldn't see big things come out of this," he said.
Mr. Mussell noted the agreement gives Canadian producers access to the U.S. market, but it is unclear how an existing export cap will affect those sales.
The cheap imports will be good for food makers and restaurant owners, but will be bad news for dairy farmers already facing a flood of tariff-free high-protein dried milk products from the United States. Ontario dairy operations faced with a glut have been dumping skim milk into manure pits this year amid strong demand for richer dairy products and limited processing capacity.
The Dairy Farmers of Canada did not immediately respond to a request for an interview. In October, the group said it was relieved that the TPP agreement preserved the supply management system, and called the compensation package "fair."
But the group that speaks for 12,000 farmers said it was disappointed that the deal granted access to foreign producers.
"The milk displaced by this agreement will never be produced in Canada, and will result in perpetual lost revenue for our farmers, and for the Canadian economy," it said.