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NAFTA Sticking Point Number One: The Dairy Industry

by John Brian Shannon

One of the main sticking points in the ongoing NAFTA re-negotiation is Canada’s regulated dairy industry vs. America’s market-driven dairy industry. And it shouldn’t be.

The dairy industry in Canada uses a system called ‘Supply Management’ to produce only as much milk as is required (with no waste) for the Canadian market, and unlike the American dairy industry it isn’t an export-driven model.

Yet, it’s the United States under President Donald Trump that is pressing Canada to accept American milk into the Canadian market. That same United States subsidized its dairy industry to the tune of $22.2 billion (2015) a number that increases every year. In fact, without massive subsidies American dairy producers would go bankrupt in a year.

U.S. dairy subsidies equal 73% of producer returns, says new report

“Based solely on the USDA’s national average farm-gate price and national average costs of production, Clark says American dairy farmers lost money every year from 2005 to 2016. The report figures support granted to U.S. dairy farmers in 2015 represented approximately $0.35 per litre — almost three-quarters of producers’ revenue.” — RealAgriculture.com

Why President Trump or anyone in America’s dairy industry would want to subsidize Canadian consumers by $1 per gallon is a complete mystery.


American Milk Has High Levels of Growth Hormone and Antibiotics that are Illegal in Canadian Milk

Not one gallon of U.S. dairy product is allowed to be sold in Canada for this reason, although some Canadians do cross the U.S. border and are allowed by the Canada Border Services Agency to return with small amounts of American dairy products for their own consumption (but not for resale).

There are up to 20 chemicals, hormones and antibiotics in milk and Monsanto’s glyphosate is toxic to dairy cows

“According to the Daily Mail, a study published in the Journal of Agricultural and Food Chemistry released information that cow’s milk contains traces of anti-inflammatory drugs such as niflumic acid, mefenamic acid, ketoprofen, diclofenac, phenylbutazone, naproxen, flunixin, diclofena. The researchers also discovered hormones (both natural oestrogen and 7-beta-estradiol), antibiotics, anti-fungal drugs, steroids and Anti-malaria drugs (pyrimethamine) in milk and dairy products.” — excerpt courtesy of SeattleOrganicRestaurants.com

Will Canadians want to purchase dairy products sourced in the United States where such growth hormones, chemicals and antibiotics are on the ingredient list? Likely not.

However, those living in poverty might. Prison administrators in Canada who feed thousands of people every day might enjoy saving $1.00 per gallon of milk and save even more by purchasing American cheese and other dairy products — those savings courtesy of the American taxpayer.


Canadian Cows are Happy Cows!

(Because they don’t have to take bovine growth hormone or other nasty medicines or chemicals)

The happy cows at Harmony Organic in Ontario, Canada

The cows at Harmony Organic in Ontario, Canada are happy because they don’t have to take bovine growth hormone or other chemicals or drugs. Image courtesy of HarmonyOrganic.ca

But it’s not all cowbells and sunny meadows for the Canadian dairy industry. Canada employs the Supply Management system which plots exactly how much milk will be required annually and the country’s milk producers must comply.

Canada’s dairy industry regulates the supply to ensure the optimum amount of milk for the Canadian market without the oversupply spikes or undersupply crashes that other countries experience due to market forces.

It means that every year some amount of Canadian dairy product is poured back onto the fields so that prices will stay high enough for Canada’s milk producers to stay in business. While pouring milk on fields re-adds vital nutrients to the soil it’s an expensive way for farmers to condition their soil. Consequently, it doesn’t happen very often.

Canada’s dairy industry is sized to fit the Canadian market and very little of the country’s milk is exported, therefore, American milk producers rarely compete with Canadian milk producers anywhere on the planet.

Canada’s dairy industry contributes about $20 billion CAD to Canada’s GDP, which is smaller than the $21 billion USD that the California dairy industry sells to Californians — but California also exports an additional $44 billion USD worth of dairy products to other U.S. states — and good for California! Both the Golden Bear state and other U.S. states benefit from the excellent growing and production conditions in California.


Summary

The Canadian industry threatens no other country’s dairy industry as it’s sized for Canadian needs alone — therefore, one wonders why President Trump wants to flood the Canadian market with subsidized American milk and other dairy products.

And the reason Trump wants to export U.S. dairy products is because there’s a huge supply glut in the United States which means that dairy producers there must either downsize or find new markets.

If President Trump wants to export American milk, here’s some food for thought; The total annual demand for milk in China is more than the United States could produce in 10-yearsand 1.35 billion Chinese citizens pay an average of $7.00 USD per gallon of milk while 327 million Americans pay an average of $2.39 USD per gallon.

American milk producers could charge Chinese consumers $5.50 USD a gallon (and not require U.S. subsidies due to the higher retail price in China) and still sell every gallon they could ever hope to produce!

America’s leaders must stop focusing on microscopic markets like Canada where the market is already saturated with established Canadian producers and concentrate their efforts on the huge unfilled demand economies like China where they pay so much for milk that American subsidies could be discarded entirely and U.S. dairy products would still be cheaper than what Chinese consumers pay now.

Why American Automakers Should Stop Building Cars in Canada

by John Brian Shannon

At first glance, the idea that the ‘Big Three’ American automakers (Chrysler, Ford and GM) would stop manufacturing their cars and trucks in other countries might seem like a ground-breaking idea.

But it’s not as shocking as some new ideas that were brought to light over past decades, such as putting engines in sailing ships enabling them to cross entire oceans, or travel by aircraft instead of train, or that man should walk on the Moon by 1970.

Still, the idea that America’s Big Three automakers would stop building their cars in other countries might be seen as a novel idea.


Why Would American Automakers Want to Stop Building Cars in Other Countries?

Let’s take the case of the North American car market:

Chrysler, Ford and GM own auto assembly plants in Canada, the United States and Mexico where they produce millions of cars and trucks per year. The majority of those vehicles are then sold into the U.S. because it’s a far bigger market than the Canadian and Mexican vehicle market combined.

Which means that many American auto industry jobs are lost to Canada and Mexico.

President Trump wants to lower the unemployment rate in his country and help make his domestic auto industry stronger and more responsive to the American market via high tariffs or restrictions on the number of cars Canada and Mexico can export to the United States.

The trade-off of that move would be worse relations with Canada and Mexico which have long benefited from Big Three auto factories located in their respective countries and Canada and Mexico would be loathe to lose those economic benefits.

And although I see U.S. President Donald Trump’s point on this — I’d rather talk about solutions that could work for all three countries.


What if There’s a Way for Each of the NAFTA Countries to Win?

Let’s pretend for a minute that we’re looking at the North American auto industry from the vantage point of 5-years in the future.

Five years on, let’s say that every Chrysler, Ford and GM vehicle sold in the United States is manufactured in the United States, unemployment is at an all-time low, and the American economy is rocketing along like it was in the 1960’s. Great!

What about Canada?

Five years from now the Big Three factories presently located in Canada would remain but would no longer be needed by the Big Three automakers because Canadian companies approved by Chrysler, Ford and GM would build 100% of all the Chrysler, Ford and GM vehicles required for the Canadian market.

Such licensee companies would be required to meet the exact same manufacturing and quality standards and warranty terms as U.S. built cars.

Canadian companies like Magna International already produce a significant number of the parts required for all of the Big Three automakers; Extending their license to include vehicle assembly on behalf of one of the U.S. auto companies would be an easy transition.

Or, entirely new companies could be formed; One company (‘Chryton Co.’) could build all Chrysler cars and trucks for the Canadian market by purchasing the existing Chrysler manufacturing plants in Canada and paying the required per-unit license fees to Fiat Chrysler USA, while ‘FordX’ could purchase all the Ford factories located in Canada and build every Ford vehicle for its Canadian dealers after paying the appropriate per-unit license fee to Ford USA. Likewise, GM vehicles would be built by a GM-approved company (‘AC Delco’) that would pay a license fee to GM USA for each vehicle it builds for the Canadian market.

In that way, 100% of all Chrysler, Ford and GM vehicles destined for the Canadian market would be manufactured in Canada by Canadian workers — and other than paying license fees to the respective USA auto manufacturer — the Canadian automotive manufacturing industry would be 100% Canadian. That’s 100% Canadian-owned and 100% Canadian-staffed. (They would still need to match U.S. manufacturing and warranty standards however)

Exactly the same could be done in Mexico for Mexican companies and consumers. (They would still need to match U.S. manufacturing and warranty standards however)

And all Chrysler, Ford and GM cars and trucks destined for the U.S. market would be manufactured in the United States by American workers and the U.S. auto industry would find itself in the middle of an economic boom!


In an Era of 3D Printing, License Fees Will be Everything

Welcome to the future!

If you live in Canada and you want a Ford car you simply order the car online and the Ford-approved Canadian company 3D prints and otherwise assembles your Ford car in a city near you, and the car arrives at your local Ford dealership a few days later.

You might even choose to watch it being 3D printed, painted, and assembled on your laptop.

Other than upholstery and tires, etc. all 3D printed cars and trucks will need to be made from aircraft-grade aluminum alloy which works better than steel for 3D printing.


Not Only The Big Three, But European and Japanese Automakers Too!

Imagine if EVERY new car and truck sold in Canada is built in Canada by Canadian companies that pay a license fee to the respective American, European, or Japanese automaker. That equals full employment in the Canadian auto sector — without the (understandable) griping by President Trump about American job losses.

Imagine if EVERY new car and truck sold in the U.S.A. would be built in the United States by American workers, and even European and Japanese vehicles sold in the U.S. would be built by U.S. companies that paid for the rights to 3D print and assemble those cars. That equals full employment in the American auto sector.

Imagine if EVERY new car and truck sold in Mexico would be built by Mexican companies that pay a license fee to the respective American, European, or Japanese automakers. That equals full employment in the Mexican auto sector, without any griping by President Trump about American job losses.

NOTE: Hand-built cars like Rolls Royce, Ferrari, Aston Martin, etc. would decline to take part in such an arrangement, but those cars account for less than 1% of the North American market share. They would simply continue to export their cars to their North American customers as usual.

Again, manufacturing and warranty standards would need to be carefully vetted by the licensor before granting manufacturing rights to licensees. Even so, every country in this equation would ‘Win-Win-Win’.

And consumers could purchase a locally built vehicle that wasn’t shipped across the continent or thousands of miles of ocean.

Shop Local, and still get the ‘foreign’ car of your dreams!


Auto Manufacturers Would Make the Same Per Vehicle Profit in Foreign Countries as They do Now — but via License Fees (only)

The era of ‘things-based’ globalization is morphing into ‘ideas-based’ globalization where things are designed in country ‘A’ by a company that retains 100% rights over who is allowed to 3D print and assemble its products in country ‘B’ — which could be anywhere on the planet.

Whether it’s T-shirt graphics electronically transmitted and licensed to a company thousands of miles away (as is done now) or whether licensed companies 3D print and assemble your foreign car in the city where you live — globalization might finally become all that it can and should be — creating hundreds of thousands of jobs in each country for workers in 3D printing/manufacturing facilities that could literally build anything, anytime, for anyone, as long as they have purchased the proper license.

Such ‘On Demand Manufacturing’ might become the biggest job creator ever and lower the tensions brought on by the endless competition between the world’s free trading nations.


Ready for the future Canada? Order your foreign-designed but locally-manufactured American, European or Japanese car here.

(OK, just kidding… But it might be just that easy in only a few years!)