The full implementation access granted under CUSMA, in addition to existing trade concessions, will represent about 18% of the Canadian market. When considering the latest three trade agreements—CETA, CPTPP and CUSMA—Canadian dairy processors will lose approximately $320 million per year on net margins at full implementation.
On top of the market access concession, CUSMA has a clause that imposes export caps on worldwide Canadian shipments of milk protein concentrates, skim milk powder and infant formula.
For example, for SMP and milk protein concentrate, a cap of 55,000 tonnes is imposed for the first year, and 35,000 tonnes for the second year. After year two, each cap will increase at a rate of 1.2% annually.
Knowing that in the 2017-18 dairy year Canada exported more than 70,000 tonnes of skim milk powder, there is no question that a clause limiting our export worldwide will drastically impact Canadian dairy processors' domestic milk supply requirements from Canadian dairy farms. Indeed, we estimate that the export caps could result in an annual loss of $60 million for dairy processors.
We would also note the extremely peculiar aspect of imposing caps on Canadian exports of the three dairy goods to all countries, including those that are not part of CUSMA. This is a first in a trade agreement and a very dangerous precedent for Canada.
One way for the government to at least try to mitigate the negative impact of the export caps is to ensure that CUSMA enters into force on August 1, 2020 or later, so that the industry operates a full year under a higher export cap of 55,000 tonnes.