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U.S. dairy lobby increases pressure on Canada; NAFTA fight looms

Reuters  |  OTTAWA/WINNIPEG 

By David Ljunggren and Rod Nickel

OTTAWA/WINNIPEG (Reuters) - The U.S. lobby is ratcheting up the pressure on as talks to renegotiate NAFTA draw closer, demanding concessions the Canadian looks unwilling to grant, according to people familiar with the file.

The result could be a brawl that sours efforts to modernize the North American Free Agreement, under which sends most of its exports to the United States. Mexico is the pact's third member.

U.S. farmers have long chafed about supply management, the term for Canada's system of tariffs and quotas to keep domestic prices high and imports low. A 2016 deal that allowed Canadian farmers to sell milk proteins, which are used to make cheese and yogurt, to domestic processors at a discount, curbing the flow of American imports, further raised their ire.

Jaime Castaneda, senior vice president for the U.S. Export Council, said the influential lobby group will pursue fresh challenges through the World Organization unless stops the proteins sale.

"If we can't resolve this through negotiations, I believe my members will be very clear that everything is on the table," he said in a phone interview.

A WTO panel ruled in 2002 that breached its obligations through illegal subsidies to its industry, siding with the United States. The United States and reached a settlement in 2003.

Castaneda said challenges against the protein sales could eventually result in rulings that force to ditch supply management.

In June, U.S. Agriculture Secretary Sonny Perdue said he would prefer to address irritants before NAFTA talks begin and said supply management was fine as long as though it did not harm the U.S. industry.

But on July 14 he appeared to toughen his stance, saying through a spokeswoman he felt "all options should be on the table" in the NAFTA talks and that remained a concern.

Washington released its goals for negotiating NAFTA on Monday, saying it sought to eliminate non-tariff barriers to U.S. agricultural exports.

Canada, though, feels the language is more directed at Mexico, which runs a large surplus with the United States, said a source familiar with Canadian thinking. Canada's in goods and services with the United States is roughly balanced.

Although was originally excluded from the original 1994 deal, the United States may push for it to be part of the talks on a new pact.

"I don't see why it wouldn't be, when you're looking at an overall trading relationship ... there is no doubt in my mind that it would be on the table," said one person familiar with Washington's approach.

Despite the more strident U.S. line, Prime Minister Justin Trudeau's has little interest in compromise.

"We are fully compliant and in products massively favours the United States," said a Canadian source.

Canada's sector includes C$6 billion ($4.8 billion) in annual farmer milk sales.

'A FORCE TO BE RECKONED WITH'

Fearing the domestic industry's lobbying muscle, Canadian politicians of all stripes mostly treat as a sacred cow.

In May, farmers helped ensure the defeat of a Conservative party leader candidate who advocated eliminating supply management.

"farmers are a force to be reckoned with. I think (politicians) will do well to listen to our concerns," said Manitoba farmer David Wiens, an executive of the influential Farmers of

U.S. President Donald Trump said in April he would stand up for domestic farmers against what he called unfair Canadian practices.

The American side also wants to start cutting tariffs to allow more imports. As part of talks on a proposed 12-nation Pacific treaty in 2015, agreed to open up 3.25 percent annually of its supply.

That treaty was still-born, and Canadian farmers dismiss talk of concessions.

(Writing by David Ljunggren; Editing by Nick Zieminski)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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