NAFTA provides unfettered access to Canadian market for U.S. high-protein milk ingredients—at least for now.
Thanks to the North American Free Trade Agreement, the United States dairy industry currently enjoys unfettered access to the Canadian market for milk protein products containing 85 percent or more protein.
And Canadian dairy producers have started to take note.
Market access for the rest of the world for these products is limited to 10,000 tons and the over-quota tariff rate is set at 270 percent.
“Canada’s dairy sector is highly protected,” notes Mary Ledman, dairy economist with the Daily Dairy Report and president of Keough Ledman Associates Inc., Libertyville, Ill. “A supply quota limits Canadian milk production, and imports are restricted in 10 categories of dairy products.”
These restrictions were converted to tariff rate quotas (TRQs) as a result of the 1994 World Trade Organization (WTO) trade agreement, according to Ledman. In 2008, Canada undertook an Article XXVII action to create a new TRQ for milk protein included in chapter 35 of the Harmonize Trade Schedule.
“Due to the North American Free Trade Agreement (NAFTA), though, the TRQ cannot be applied against the United States,” says Ledman. “As a result, U.S. exports of milk proteins over 85 percent protein to Canada have grown steadily in recent years.”
In 2014, Canada imported nearly 14,000 metric tons of protein isolates, a 37 percent increase compared to 2013 imports.
Advancements in manufacturing technology that reduce cost and increase flexibility in manufacturing have led to a growing demand for U.S. milk proteins in Canada, according to USDA’s Foreign Agriculture Service.
Milk proteins are used in a variety of food applications, including infant formulas, protein and nutrition drinks for people of all ages, and breakfast and other nutrition bars to name a few.
Canadians take note
“Growing U.S. milk protein exports to Canada have raised the ire of the Canadian Dairy Farmers lobby, which contends that milk protein substances with 85 percent or more protein are diafiltered milk, and products made with diafiltered milk are prohibited under the Canadian compositional standards for cheese making,” she says.
Diafiltration is a process used in conjunction with ultrafiltration in which water is added back into ultrafiltered milk. The resulting substance is then dried to a power. Dried milk protein concentrate (MPC) can be made using a combination of ultrafiltration and diafiltration.
Other products are also made using a combination of these techniques. For example, production of lactose-free, sugar-free or low-carbohydrate ice cream can also be made using ultrafiltration in conjunction with diafiltration to remove up to 96 percent of the lactose normally found in milk.
While advancements in manufacturing technology have led to greater U.S. exports of milk protein 85, “a change in the classification of milk protein 85 could severely impact U.S. exports of milk proteins to Canada,” Ledman adds.
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