UPDATE 1-Canada dairy farmers say Europe trade deal payout falls short

(Adds minister’s comments on compensation, pricing agreement)

By Rod Nickel

Nov 10 The Canadian
government said on Thursday that it would spend C$350 million
($259.88 million) to help its dairy sector compete against
increased European imports allowed under a free trade deal, but
the amount falls short of farmers’ expectations.

The money includes C$250 million over five years to help
farmers update equipment, and C$100 million over four years to
help dairy processors modernize operations, Agriculture Minister
Lawrence MacAulay said in a statement.

Dairy Farmers of Canada, an influential lobby group, said
the money only partially addresses “damage” that Canada’s free
trade deal with the European Union will inflict.

Under the deal, European dairies would receive tariff-free
access for an additional 17,700 tonnes of cheese, representing 2
percent of Canadian milk production, according to Dairy Farmers
of Canada.

The previous Conservative government had promised C$4.3
billion over 15 years to compensate dairy, poultry and egg
farmers, but that pledge dissolved with their election loss last
year.

The Liberal government designed the payout after consulting
the dairy industry, and it will place the processing sector “on
the cutting edge,” MacAulay told reporters.

“We certainly do feel it’s enough,” he said.

The European Union and Canada signed the free trade
agreement last month, but it must still clear some 40 national
and regional parliaments in Europe in coming years to enter
fully into force.

Funds for the dairy sector could help processors such as
Agropur, Saputo Inc and Parmalat SpA’s Canadian unit
upgrade plants. Processors are already boosting
domestic production of milk proteins for cheese production at
the expense of imports, but some need to overhaul their plants.

Canada’s supply management system tightly controls dairy
prices and production, and Ottawa levies steep tariffs to limit
imports.

Dairy farmers and processors struck an agreement in July
that allows Canadian processors to buy milk ingredients from
farmers at the lowest of international prices. Industry groups
in the United States, New Zealand, Australia and Europe say it
undercuts their exports and violates World Trade Organization
competition rules.

MacAulay said his government had no role in the July
agreement.

“Anything that can help the (Canadian) dairy sector, we
support,” he said.

($1 = 1.3468 Canadian dollars)

(Reporting by Rod Nickel in Winnipeg, Manitoba; Editing by
Marguerita Choy and Tom Brown)

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