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It became a noticeable line from Canadas point of view, he told us. Canada does have a protectionist dairy industry, with quotas on milk production and regulated pricing on milk products, Stephenson said in a phone interview. But that system can only really befunctional if they can keep a pretty tight reign on a product coming in. Other dairy products imported into Canada are subject to tariffs, but since ultrafiltered milk is a relatively new phenomenon in the milk industry, its simply not on the list. It wasnt restricted when NAFTA or earlier World Trade Organization negotiations occurred, Stephenson said, in terms of a quota or a tariff. So when ultrafiltered milk gets to the border, he explained, custom officials say, Yep, no restrictions on that trade.' Canadas dairy industry overall wasnt part of NAFTA, something that could change if NAFTA is renegotiated. Instead, NAFTA opened up the dairy trade between the U.S. and Mexico, an issue brief published by Cornell University in April 1994, the year NAFTA went into effect, explains. Stephenson sent us this chart showing the growth in monthly value of U.S. exports of milk protein isolates, such as ultrafiltered milk, to Canada. That growth recently began to decline, after Canada made changes to its pricing on the product. Source: Dairy Policy Analysis, University of Wisconsin-Madison From the Canadian standpoint, its dairy farmers had milk protein that they wanted to sell, too. Everyone has extra, Von Massow said, because of the increased demand for butter. Canadas regulation of its dairy industry includes quotas for how much Canadian farmers can produce and pricing set for various milk products.

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