Trudeau’s Liberal Party is vying to maintain its supporters in Ontario and Quebec, where the country’s powerful dairy industry is concentrated and provincial elections are approaching. The Trump administration, looking ahead to the November elections, wants to bolster support among a hard-hit dairy sector that’s struggling with a global milk glut and depressed prices.
At issue is market access to Canada’s $17 billion dairy sector, which operates under a so-called supply management system that limits production, restricts imports and sets floor prices — similar to American sugar policy. U.S. trade negotiators want Canada to expand import quotas that currently permit only a small amount of dairy products to enter the country tariff-free, as well as eliminate a low-price policy for a protein-rich milk ingredient called ultrafiltered milk, which is used to make cheese and yogurt. It’s formally known as Class 7.
Gregg Doud, USTR’s chief agricultural negotiator, told senators last week that ending Class 7 is the major focus of dairy talks. The challenge is how “disparate” the U.S. and Canadian dairy markets are, but trade officials have spent an “enormous” amount of time working on the issue in good faith, he said.
Potential solutions: Two former U.S. trade negotiators and experts on U.S.-Canada relations told POLITICO they expect Canada to open a small percentage of its dairy market by expanding quotas that allow imports to cross the border tariff-free. The new access would likely be similar to what Canada offered the European Union and Asia Pacific nations in recent trade deals: an additional 5 percent of its cheese market and 3.5 percent of its overall dairy market, respectively. Whether Canada will remove its Class 7 policy is the big question.
HAPPY MONDAY, SEPT. 17! Welcome to Morning Ag, where your host digs this discovery that humans have been brewing beer for as long as 13,700 years — even before the advent of agriculture. Still, a porridge or gruel-like beer doesn’t sound appetizing. Send news and tips to lcrampton@politico.com or @liz_crampton. Follow the whole team @Morning_Ag.
TRUMP TO PULL TRIGGER ON NEW CHINA TARIFFS: Against the advice of many members of Congress and a large segment of the business community, President Donald Trump plans to impose duties on roughly $200 billion more in Chinese goods as soon as today, a senior administration official confirmed to POLITICO this weekend. The move would escalate the protracted trade battle between the world’s two largest economies, prompting China to fire off another round of tariffs that would bring new pain to parts of agriculture.
The White House, which could make an announcement today or Tuesday, will slap a 10 percent tariff on the list of $200 billion in goods, the official told POLITICO. “We’ll start at 10” percent, as the administration originally indicated on July 10, the official said. However, the duties could eventually be ratcheted up to 25 percent, as Trump directed U.S. Trade Representative Robert Lighthizer to consider on Aug. 1, the official added.
To meet or not to meet: News of the planned tariff move came just days after U.S. Treasury Secretary Steven Mnuchin invited Chinese Vice Premier Liu He for a new round of trade talks. The Wall Street Journal reported Sunday that the effort is now in doubt. It also raises the stakes for a possible bilateral meeting between Trump and Chinese President Xi Jinping at the annual G-20 Summit Nov. 30-Dec. 1 in Argentina.
By the numbers: The Trump administration has already imposed duties on about $53 billion worth of Chinese goods, including on about $3 billion worth of steel and aluminum. China has matched the U.S. action and threatened to hit another $60 billion worth of U.S. goods if Trump follows through on his threat to tax the list of $200 billion in imports. That would raise the totals to $253 billion in Chinese imports facing new tariffs, compared with $113 billion in American goods.
More in store? Trump also has threatened to impose duties on virtually all Chinese imports, which totaled $505 billion in 2017, if China continues to retaliate against his actions. Earlier this month, he said the administration had tariffs ready to go on another $267 billion worth of Chinese goods, in addition to the $200 billion that would be subject to the pending action. However, the administration has not taken public comment on the proposed action against $267 billion in imports, so it could be a while longer before duties are imposed on any those goods, assuming previous procedures are followed.
In the meantime, “there is little indication that the government in Beijing is ready to change its practices or give in to U.S. demands,” our colleague Adam Behsudi reports from Beijing. “The close relationship between state-owned companies and government should make it easy for China to institute quickly new policies on U.S. criticisms over mandatory technology transfers or intellectual property. Yet nothing has been offered publicly indicating that Chinese officials are willing to adapt their approach.”
With help from Catherine Boudreau, Helena Bottemiller Evich, Doug Palmer and Maya Parthasarathy