Cows stand at the Lookout dairy farm in North Hatley, Quebec, Canada on Wednesday, Sept. 5, 2018. Christine Mushi | Bloomberg | Getty Images

Canadian dairy farmers are fuming over the renegotiated trade deal with the U.S. due to concessions Ottawa made that could lead to hundreds of millions in lost revenue for producers. The new trade deal, to be called United States-Mexico-Canada Agreement, grants the U.S. an expanded 3.6 percent access to Canada's dairy market and gets rid of a controversial domestic milk pricing class Ottawa had previously defended. President Donald Trump has been critical of Canada's protectionist dairy policies, blasting them as "not fair to our farmers" and harmful to milk producers in Wisconsin and other border states. "The announced concessions on dairy in the new USMCA deal demonstrates once again that the Canadian government is willing to sacrifice our domestic dairy production when it comes time to make a deal," said Pierre Lampron, president of Dairy Farmers of Canada, a trade group representing producers. "The government has said repeatedly that it values a strong and vibrant dairy sector — they have once again put that in jeopardy by giving away more concessions."

Dairy as 'bargaining chip'

The new trade deal to modernize the North American Free Trade Agreement follows 14 months of talks between Washington and Ottawa officials. The U.S. and Mexico reached a trade deal in late August. Trump had threatened to leave Canada out of a new trade deal and impose car tariffs if Ottawa didn't reach a deal by a deadline of midnight Sunday. Lampron, an organic dairy farmer in Mauricie, Quebec, added that the agreement was a sign that Canada's dairy farmers "are nothing more than a bargaining chip to satisfy President Trump." The Canadian dairy trade group said the new trade deal "weakens the dairy sector which, among other things, employs more than 220,000 Canadians and contributes some 20 billion dollars a year to Canada's gross domestic product. The livelihood of these thousands of Canadians and the future generations of dairy producers is seriously at risk."

David Wiens, owner of Skyline Dairy, speaks while standing next to cows at his farm near Grunthal, Manitoba, Canada, on Friday, March 16, 2018. Trevor Hagan | Bloomberg | Getty Images

"It's been a huge disappointment for us as dairy producers, said David Wiens, chair of Dairy Farmers of Manitoba. "With almost 4 percent access being given of the Canadian market ... it further undermines our market and our revenue."

Calls for US boycott

The dairy concessions also led to some calls in social media for a boycott of imported U.S. dairy products. Some also wondered if they will even know whether the dairy products are made locally or in the U.S. Canadian dairy products are currently labeled with country of origin but sometimes in very small print. https://twitter.com/Skatrgurrl/status/1046781958598971392 Canada purchased nearly $636 million worth of U.S. dairy products last year, according to the U.S. Dairy Export Council. Mexico was the largest single market for U.S. dairy exports in 2017, representing $1.31 billion in products, particularly cheeses. Prime Minister Justin Trudeau sounded a cautionary note about the new trade agreement in remarks Monday, saying that the deal "still needs to be ratified in Canada, Mexico and the U.S. But what I can say is, free trade in North America, a trading zone that accounts for more than one-fourth of the world's economy with just 7 percent of its population, is in a much more stable place than it was yesterday. We now have a path forward." Canada uses a supply-management program to support various agricultural sectors, including dairy and cheese, and Trudeau last year said the system "works very well." Under the system, provincial dairy marketing boards have a role in establishing local prices, and the federal government helps monitor national production and demand and coordinates policies with provincial boards and sets production quotas. "Dairy is a heavily regulated industry and highly dependent on quotas," said Joseph Glauber, a senior research fellow at the International Food Policy Research Institute in Washington.

Killing Class 7

The Canadian federal government offered dairy farmers compensation but some producers were skeptical it would be helpful and also suggested they didn't want a handout from the federal government. Wiens, the Manitoba dairy farmer, predicted the new trade deal will end up costing dairy producers significant revenue losses. "We know the loss to the Canadian dairy industry will be at least $240 million ... and that's not even calculating the losses we will have with the ending of the Class 7 [policy]," he said. He said killing Class 7 will "make it impossible for us to export any protein-based dairy products." The trade deal doesn't do away with supply management but will result in Canada expanding access to 3.6 percent of the dairy market to U.S. producers and also eliminate Canada's Class 7 policy. The Class 7 category of milk prices was designed to compete with cheap supplies from the U.S. However, some U.S. experts suggested the access under the new agreement still allowed for continued protections of Canada's dairy market but could lead to more market liberalization later. "This isn't like letting the border wall down and just letting dairy product flow across the border," said Glauber, a former U.S. Department of Agriculture chief economist. "It's small amounts, but they will certainly give rise to pressures to liberalize those markets over time."

270 percent tariff