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Prior to 1995, Canada maintained a range of measures which placed limits on dairy product imports in order to maintain the stability of its national milk supply management system. These controls changed significantly in 1995, however, as a result of the World Trade Organization (WTO) Agreement on Agriculture whereby Canada and other signatories agreed to replace quantitative import restrictions with tariffs and tariff rate quotas which effectively moved Canada into a much more global marketplace. Summaries of tariff rate imports and lists of quota holders can be viewed on the Web site of Foreign Affairs and International Trade Canada .
Under the terms of the 1995 WTO Agreement, Canada has established Tariff Rate Quotas (TRQ) for butter, cheese and ice cream. Canada's current Tariff Rate Quota for butter is 3,274 tonnes and imports of butter under the TRQ represent approximately 3 to 4 percent of butter consumed in the Canadian market place. To date, the CDC has acted as the first receiver of imported butter under federal permit, and has directed it through processors to the further processing sector in a manner designed to minimize adverse effects on the domestic market.
In 2005, Canadian dairy imports reached approximately 202,280 tonnes for a total value of $597.2 million. This represents a 9% increase in quantity over the previous year which can be partially explained by an increase in imports under the Import for Re-export Program (IREP). The top three products imported in monetary terms were cheese (37%), casein products (18%) and butter and fats and oils (12%). Following closely behind was whole milk powder which accunted for 11% of the total value of imports.
Imports of cheese are limited to a tariff rate quota of 20,412 tonnes. Any imports above that level are made through IREP and over access imports which are subject to a high rate of duty. Imports of cheese increased to 25,240 tonnes in 2005 and consisted primarily of specialty cheese (74% of the total value of cheese imports) and processed cheese (13%).
Total imports of casein products reached 14,758 tonnes in 2005 for a total value of $109.2 million representing a 1.4% decline in value compared to the previous year. The total volume of imports consisted mainly of caseinates and other casein derivatives (47%) and casein glues and caseinates for Canadian industrial manufacturing (32%).
Imports of butter and fats and oils derived from milk decreased by 14% in 2005 to reach a total of 23,750 tonnes and a value of $69.6 million. The decline can be explained by a decrease in the level of imports under the IREP program.
Certain products experienced a large percentage growth over the previous year due to an increase in their levels of IREP. These were skim milk powder and cream. In terms of quantity, these two products make up a total of 6,496 tonnes and account for about 3% of total dairy imports.
In 2005, the products experiencing the largest declines in percentage terms were evaporated milk, dairy spreads and liquid buttermilk. Imports of these products decreased by 84%, 81% and 63% respectively
In 2005, the largest suppliers of dairy products in terms of value were the European Union (39%), New Zealand (24%) and the United States (23%). Primary suppliers of specialty cheese were France ($39.9 million), Italy ($32.7 million) and the United States ($7 million). Germany was the primary supplier of casein products in 2005, accounting for over 51% of the total value of imports. Primary suppliers of butter and fats and oils derived from milk were New Zeland, Uruguay and Argentina, which make up 36%, 19% and 18% of the value respectively.
Since the WTO decided in December 2002 to limit Canadian subsidized exports, IREP has become a vehicle by which to obtain milk and other dairy products for the production of both dairy and ruther processed products. Imports of dairy products under IREP reached approximately 73,093 tonnes in 2005, a 7% increase over the previous year and make up about 36% of total dairy imports. The main products imported under the program are whole milk powder, butter and fats, and oils derived from milk.
With the exception of sales of skim milk powder to the governments of Mexico and Cuba, the Canadian Dairy Commission can no longer directly exports dairy products. Unsold products are offered to commercial establishments for export. Exporters may receive a class 5(d) permit for products which the CDC cannot purchase but are considered surplus to domestic requirements.
In regard to cheese exports, the CDC's major responsibility is to deliver certificates to Canadian exporters that give them access to the aged cheddar market in the European Union. In 1980, Canada negotiated a special access quota with the European Union. This volume, as well as the exports associated with the 5(d) permits issued by the CDC to trading companies, are accounted for against Canada's export commitments to the World Trade Organization (WTO).
In 2005, Canadian exports of dairy products reached 114,650 tonnes for a total revenue of $242.3 million. This represents a 9% decrease over the previous year. The main products exported in monetary terms were cheese (27%), dairy spreads (18%) and ice cream (16%). Exports of cheese reached 10,301 tonnes for a total value of $65.7 million which represents a 14% decrease over the previous year due to a decrease in the value of products exported to the United States (-34.85). Exports of ice cream doubled in 2005 to reach 10,145 tonnes due to a significant increase in the volumes exported to Kuwait, Saudi Arabia and the United Arab Emirates.
Products experiencing the largest percentage increase in dollar terms were butter and fats and oils derived from milk and milk albumins. Due to an increase in Canadian stocks for butter, exports of butter and fats and oils rose by 476% relative to 2004 to reach a total value of $2.6 million.
The products experiencing the largest declines in percentage terms were lactose and lactose syrup, casein glues and caseinates and evaporated milk. These three products make up only 1.2% of the total value of exports and decreased by 99%, 93% and 81% respectively.
The 9% decrease in exports over the previous year is due to a decrease in export shipments to South Korea
(-$6.3 million) and Egypt (-$5.3 million) as well as a decrease in the value of products destined for the United States. The United States continued to be the primary destination for dairy spreads, accountings for 99.4% of total exports. The top three destinations for butter were the United States (29%), the United Kingdom (18%) and Morocco (14%).
The Canadian dairy trade balance has been negative since 1999. The Canadian dairy trade deficit reached $354.9 million due to both a decrease in exports and increase in imports in 2005. This represents a depreciation of 9% compared to the previous year due in part to the appreciation of the Canadian dollar and the continuing increase in the use of the Import for Re-Export Program (IREP).
International dairy prices rose in 2004 and remained strong throughout 2005. Northern Europe's low freight on board prices for butter, cheese, skim and whole milk powder increased on average 7%, 10%, 12% and 8% compared to 2004 which can be explained by an excess demand in the international dairy market. Poor weather conditions in Oceania and limited production growth in the European Union as per the supply quotas of the Common Agricultural Policy, tightened world dairy supplies in face of a rising international demand especially from South East Asia, the Russian Federation, the Middle East and North Africa.
The appreciation of the Canadian dollar vis-à-vis the US dollar has had a detrimental impact on exports to the U.S., Canada's largest trading partner. Canada's dairy trade balance with New Zealand has also slightly worsened while its trade balance with the European Union has improved by 5%. Canada also continues to maintain a positive trade balance with Mexico ($9.8 million).
* Source: Canadian Dairy Trade Bulletin: 2005, Agriculture and Agri-Food Canada
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