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

Agriculture Minister Lawrence MacAulay responds to a question during a news conference on Parliament Hill in Ottawa on Tuesday, May 3, 2016.

Adrian Wyld/THE CANADIAN PRESS

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 promised Tuesday 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.

"We are going to sit down with the industry and come up with a long-term solution," Mr. MacAulay told reporters outside the House of Commons.

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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.

The NDP wants the government to crack down on processors, who it alleges are breaking federal cheese-making standards by not using enough Canadian milk.

"The situation is urgent and producers are tired of waiting," NDP agriculture critic Ruth Ellen Brosseau said. "The solution is simple and comes down to this government standing up for Canada's dairy industry by enforcing cheese composition standards."

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.

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