As negotiations continue toward reaching agreement on a modernized North American Free Trade Agreement (NAFTA), American officials are pushing back at suggestions that it has no ground to stand on when it comes to criticizing Canadian subsidies of the domestic dairy and agricultural sectors.
In an interview on The West Block, U.S. Congressman John Faso told Global’s Eric Sorenson that he rejected the arguments made in multiple reports over the last year which pointed to American support for its dairy and agricultural industries as rationale for the Canadian government to continue defending the current subsidy system here.
READ MORE: A guide to understanding the dairy dispute between the U.S. and Canada
“I think the allegation of U.S. subsidization of dairy farms is actually misplaced,” Faso said.
“We have an insurance system in place that frankly hasn’t been very effective.”
WATCH BELOW: Freeland says US/Canada dairy trade is unbalanced – in US favour
Supply management and support for domestic agricultural sectors are among the thorniest of the unresolved issues facing negotiators, with the U.S. pushing for greater access into the Canadian markets and Canada determined to avoid the political fallout that could inevitably come from any attempts to tamper with current protections for farmers.
Canada places a 270 per cent duty on milk imports to help keep out foreign products and prop up prices for its domestic quota-based supply management system.
American dairy farmers detest that and argue the current system is unfair.
READ MORE: Dairy 101: The Canada-U.S. milk spat explained
Earlier this year, a report paid for by the Dairy Farmers of Canada suggested the American government funnels billions of dollars in direct and indirect subsidies to its dairy industry, including $22.2 billion in 2015.
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That report also pointed to data from the United States Department of Agriculture, which the association said shows that “U.S. dairy farmers operate at a loss, and have a cost of production that is higher than what they earn from the marketplace.”
While Faso said a glut of milk does currently exist, he says the challenges facing American farmers go beyond oversupply and are significantly enhanced by how Canada regulates diafiltrered milk.
READ MORE: U.S. softens stance on auto demand in NAFTA negotiations
The substance is made by heavily filtering milk and is primarily used to make cheeses and yogurts.
Diafiltered milk had been considered a protein product and therefore was not subject to the duties placed on milk imports coming into Canada — until the Canadian government created the Class 7 regulatory category in March 2017.
The Class 7 tier groups diafiltered milk products under the same umbrella as other milk products and places the same duties on them as are applied to imports of milk, a move that has essentially pushed foreign producers out of the Canadian market.
Faso said those actions have directly harmed American dairy farmers and he thinks Canada should stop.
“Our farmers are hurting, and this is not taking anything away from Canadian dairy farmers and from Canadians, certainly, but I hope our Canadian friends take a close look at the strong feelings on this side of the border about Canada’s practices in this area.”
WATCH BELOW: Freeland says NAFTA talks in period of ‘intensified engagement’
Canadian officials spent the weekend in Washington, D.C., trying to hammer out agreement on several of the remaining chapters in the NAFTA renegotiations.
Over the last two weeks, Canadian negotiators have been working with the aim of closing chapters, including those on the dairy and agricultural industries.
Concerns around the negotiations have been heightened at times over the past year by repeated threats by U.S. President Donald Trump to tear up NAFTA or walk away from negotiations.
Faso said that approach has likely not helped, but that he is optimistic about the talks.
“Frankly, I’m a Republican but I think the administration has made some missteps on trade,” he said.
“A lot of the rhetoric has been not helpful and I do think now the administration is focused properly on trying to get a NAFTA agreement done.”
WATCH: Canada will have to give up something in the NAFTA deal on supply management: Dawson
Foreign Affairs Minister Chrystia Freeland told reporters on Thursday that talks have entered into a period of “intensified negotiations” and that “good progress” has been made on other contentious chapters, such as those involving the auto sector.
While she has not indicated when a deal might be reached, several American reports over recent days have quoted sources suggesting the Trump administration is pushing to have a deal done within three weeks.
Watch the full interview with Congressman John Faso below.
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