U.S. leaders have said the Class 7 policy was effectively a way of Canada slapping a 270 percent tariff on milk. They also contended it allowed Canada to create excess milk supply domestically and then dump highly subsidized milk products onto world markets.
The Canadian dairy industry created the new Class 7 of milk prices in early 2017 for so-called ultrafiltered milk, which is used to make cheese, yogurt and ice cream.
“The dairy industry [in Canada] was going to be upset regardless of what happens,” said Patrick Leblond, a senior fellow at the Centre for International Governance Innovation in Ontario, Canada. “The only thing that would satisfy them is if the Canadians had made no concession on supply management, that is, if they offered no quotas to the Americans.”
Leblond said the Canadian dairy market quota offered to the Americans is similar to what was offered to nations part of the Trans-Pacific Partnership as well as under another deal with the European Union, the Canada-EU Comprehensive Economic and Trade Agreement.
“When the U.S. pulled out of the TPP, they lost in a way this access and now they’ve gained in a way more,” he said.
Trump pulled the U.S. out of the TPP to fulfill one of his campaign promises, although 11 other countries — including Canada — signed the deal.
The TPP deal gives access to 3.25 percent of Canada’s dairy industry while the new USMCA deal provides the U.S. with about 3.6 percent of total Canadian milk production under a tariff-free quota.
“The Canadian government actually has given [the Americans] less than what I expected that they would give,” said Leblond. “I expected something a bit above 5 percent, and at some point I heard the Americans were asking for 15 percent. So in the end the deal is at 3.6 percent. I see that as a win for Canada.”