GENERAL AGREEMENT ON TARIFFS AND TRADE

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1 GENERAL AGREEMENT ON TARIFFS AND TRADE RESTRICTED DPC/lNV/l/Add August 1980 International Dairy Arrangement INTERNATIONAL DAIRY PRODUCTS COUNCIL Reply to Questionnaire 5 Regarding Information on Domestic Policies and Trade Measures CANADA A. Production 1. Factors which affect production Supply Management Target pricing for industrial milk Support prices for butter and skim milk powder Marketing levies and surplus disposal programmes Alternative opportunities for dairy farmers Climatic and crop conditions Trade barriers Loans and interest rates 2. Policies and measures of governments affecting production Farm sales of industrial milk and cream in Canada are targeted to meet market requirements, on a butterfat basis, which in 1979 amounted to about U,U86,000 tonnes. Sales of milk for fresh liquid use are under the jurisdiction of the provinces and are limited by marketing quotas. Actual production of industrial milk and cream is effectively limited by Market Share Quota. Individual producers receive a proportionate share of the national Market Share Quota and the return for industrial milk delivered within quota to the plant as of 1 April 1980 was targeted to be US$27.02 per 100 kgs. (market return of US$22.02 per 100 kgs. plus a federal subsidy of US$5.00 per 100 kgs.). Industrial milk and cream delivered by a producer in excess of his Market Share Quota returns US$6.95 per 100 kgs. (the market return of US$22.02 per 100 kgs. less the over-quota levy of US$15.07 per 100 kgs.).

2 DPC/IHV/l/Add.13 Page 2 3- Support measures (a) Instruments of support The Canadian Government, through the Canadian Dairy Commission, supports the dairy industry by means of a target price for industrial milk and cream, and market support for butter and skim milk powder. The target price for industrial milk is based on the market returns for milk used for butter and skim milk powder plus a direct federal subsidy to producers. The target price, used to set support prices for butter and skim milk powder, has been determined by the Returns Adjustment Formula since The formula is based on input costs, the Consumer Price Index, and other factors. There is a discretionary element in the Returns Adjustment Formula which could be applied if there were significant changes in the levels of stocks of dairy products and/or changes in returns to dairy producers in other milk producing countries. It is through this discretionary measure that the domestic market may be related to developments in the international sector. The target price determined by formula allows farmers to make rational economic decisions about their dairy farm operations. Levels of support prices, Table 1 shows levels of Canadian dairy support (target returns and product support prices expressed in US dollars) for the dairy years to The dairy support year commenced on 1 April until it was changed in 1979 to 1 August. There was a transitional period, 1 April 1979 to 31 July 1979, which is included in the column. Conversion of prices in Canadian dollars-to US dollars was made on the basis of monthly average currency quotations for the periods involved up to 31 March 19Ô0. Amount of producer subsidies The direct federal subsidy paid to producers for industrial milk of $6.03 (Canadian) per hectolitre ($5.85 per 100 kgs.) has not changed in absolute terms in Canadian dollars since the start of the " dairy year, but the subsidy value expressed in American currency has fluctuated considerably due to exchange rate variation (see Table l). Average returns to producers Table 2 indicates the average returns to Canadian dairy producers per 100 kgs. of industrial milk at the farm gate. The returns are for all industrial milk sold (excluding milk for fresh liquid use) and includes the market price at the plant, less transportation costs plus the direct federal subsidy paid to eligible producers - for milk delivered within quotas.

3 DPC/INV/l/Add.13 Page 3 In general, producers receive the same price for milk for domestic use as for milk for export purposes. Producer levies are deducted from the price producers receive for their milk and submitted to the Canadian Dairy Commission, the agency responsible for administering the producer levies used to finance the cost of dairy product exports. B. Internal prices and consumption 1. Retail and wholesale prices on major domestic markets Table 3 indicates the wholesale and retail prices of butter and cheddar cheese. It is possible that data for other dairy products may be available for future questionnaires. 2. Factors which condition the evolution of internal consumption Butter Price of butter Price of margarine Consumer disposable income Changes in prices of all food products Advertising and promotion Trend towards meals eaten away from home Average age of the population Nutritional health implications of cholesterol Cheese Price of cheese in relation to other high protein products such as red meats, poultry and eggs Consumer disposable income Advertising and promotion Changes in consumers' tastes and lifestyles General availability of supply of speciality type cheeses Policies and measures affecting consumption There are no direct consumer subsidies on dairy products in Canada. The direct subsidy paid to farmers on deliveries of industrial milk and cream, however, has enabled prices for dairy products to be lower in relation to producer support levels than would otherwise be the case.

4 DPC/INV/l/Add.13 Page 4 In recent years, the federal government has been involved in a programme of market promotion, research and development. The promotion programme (advertising) has been carried out in conjunction with the producer-funded Dairy Bureau of Canada on the oasis of the federal government assuming equal share of total expenditures. Government expenditures fcr the dairy year amounted to about USSU,100,000. C. Measures at the frontier 1. Customs tariffs See Schedule A for tariffs on dairy products. 2. Import control Imports of most dairy products are controlled under the provisions of the Export and Import Permits Act which authorizes import controls for the purpose of, inter alia, implementing any action taken under the Agricultural Stabilization Act and the Canadian Dairy Commission Act to support the price of a product and to implement inter-governmental commitments. Dairy products which are subject to import control are: animal feeds containing substantial quantities of non-fat milk solids, butterfat in any form, cheese of all types other than imitation cheese, dry buttermilk, dry casein and caseinates, dry skim milk, dry whole milk, dry whey and evaporated and condensed milks. 3. Quantitative restrictions Canada established a global import quota in accordance with the provisions of GATT Article XI for all types of cheese effective 6 June 1975, but retroactive to 1 January Initially, the quota was on a calendar year basis but was changed to the dairy year effective 1 April 1976 and the quota limited imports to 22,680 tonnes with no more than ^53,593 kgs. allocated to Cheddar cheese. Effective 1 January 1980, the quota has reverted to a calendar year basis. The quota was maintained at 22,680 tonnes until the 1977~78 dairy year, when it was reduced to 20,Ul2 tonnes. As part of this settlement in the recently concluded Multilateral Trade Negotiations, Canada and the EEC signed a bilateral cheese arrangement. One of the provisions of this arrangement is that Canada will maintain the global import quota for cheese at no less than 20,Ul2 tonnes. This arrangement is subject to review in 1982.

5 DPC/OV/l/AcLcL.13 Page 5 Currently all cheese imports into Canada are carried out by private trade, although the Canadian Dairy Commission, under the provisions of the Canadian Dairy Commission Act, has the power to import on its- own account. k. Other import measures (a) (b) Anti-dumping duties may be applied under the provisions of the Anti-Dumping Act. Countervailing duties may he applied under the provisions of Section 7 of the Customs Tariff Act, At the present time there are no anti-dumping or countervailing duties being applied against dairy product imports, Sanitary, packaging and labelling regulations The import and sale of cheeses is governed by the relevant provisions and regulations of the following statutes; 1. Canada Dairy Products Act 1951, as amended. 2. Canada Agricultural Products Standards Act 1955, as- amended. 3. Food and Drugs Act, as amended. for: These statutes and regulations pertaining thereto provide, inter alia, Ca) (b) (c) (d) Ce) packaging and labelling specifications; grade specifications and standards of composition; exporter declaration for customs entry re fitness for human consumption, conformity with packaging and labelling requirements; regulations regarding damage and careless handling of dairy produce; provisions regarding ingredient listing, durable life date, use of preservatives, misleading labelling etc. 5. Export measures at tariff line level (a) Levies for export assistance Producers assume the disposal costs associated with exports of dairy products through levies on milk delivered to plants. There are several types of levies: 1. In-quota levy on industrial milk and cream 2. Over-quota levy on industrial milk and cream 3. Contingency levy on industrial milk and cream h. Contingency levy for export quota programme 5. Levy on liquid milk sales

6 DPC/INV/l/Add.13 Page6~ Producers returns are reduced "by in-quota levies to help defray the costs of exporting dairy products, mostly skim milk povder, surplus to Canadian requirements. Over-quota levies, -which are set to reflect the world market value for butter and skim milk powder, are deducted from the market price of industrial milk in order to discourage over-production by individual producers. A special contingency levy covers the disposal costs for any in-sleeve deliveries that are surplus to Canadian requirements. (The sleeve is milk delivered within quota but surplus to estimated demand and represents a 5 per cent tolerance above the Market Share Quota.) Some producers and provinces do not use all their Market Share Quota and may not produce any milk in the sleeve. To encourage foreign sales, the Canadian Dairy Commission launched a new programme in co-operation with the provinces to set aside additional quota so dairy producers could respond to export opportunities. Effective 1 August 1979, the sleeve was expanded and the contingency rate was increased. Not all provinces participated in the programme. There is also a levy on liquid milk deliveries to assist in covering some of the costs of exporting surplus dairy products. A certain amount of butterfat released in the processing of partly skimmed liquid milk (2 per cent butterfat) ends up as industrial milk products. Table h gives the amount of levies payable by producers in the period 19T5-76 to There may be some consolidation of levies in the new dairy year beginning 1 August 19Ô0. (b) Other measures Cheese exports have traditionally been carried out by the private trade although, as in the case of imports, the Canadian Dairy Commission has the power to export on its own account. Under the dairy export equilization fund, which is financed by producer levies, the Canadian Dairy Commission has the option of assisting export sales of Canadian dairy products.

7 DPC/lNV/l/Add.13 Page T TABLE 1. CANADIAN DAIRY SUPPORT PRICES FOR THE DAIRY YEARS TO , BEGINNING ON APRIL 1* Target and Support a/ b/ U.S. S Target Returns, Industrial Milk, per 100 kilograms c/ 24.02d/ e/ 27.20f/ 27.02^/ Federal Subsidy per 100 kilograms Butter - Support price per kilogram c/ d/ e/ 2.80f/ / Skim mi Ik powder - Support price per kilogram c/ d/ e/ 1.69f/ I.684/ a/ Effective April 13, 1976 b/ Effective April 13, 1978 / Effective January 1, 1978 d/ Effective January 2, 1979 e/ Effective August 1, 1979 U Effective January 1, / Effective April 1, 1980 * Note: The Dairy year was changed from April 1 to August 1, effective August 1, Currency conversion is on the basis of monthly averages for the periods concerned. Conversions for April 1, 1980 are based on currency conversions for that date. See Annex 1.

8 DPC/INV/l/Adâ.13 Page 3 TABLE 2. AVERAGE RETURNS TO PRODUCERS AT THE FARM FOR INDUSTRIAL MILK, CANADA, Year* Market Value Federal Subsidy Total Farm Cash Receipts - U.S. $ per 100 kilc igrams * Calendar year

9 DPC/INV/l/Add.13 Page 9 TABLE 3. AVERAGE WHOLESALE AND RETAIL PRICES, BUTTER AND CHEDDAR CHEESE, Butter Wholesale _a/ Retail Cheddar Cheese d/ Wholesale b,c/ Retail d/ U.S. $ per kilogram c/ c/ January February March a/ Canadian Dairy Commission, selling price, Canada First Grade Butter, Montreal. b/ Weighted average prices, white mild Cheddar, 94 and 93 score, Belleville Cheese Exchange. / New cheese series starting in 1977 not comparable with previous series. à/ Retail, Montreal. Note: See Annex for currency conversion factors.

10 DPC/lNV/l/Add.13 Page 10 TABLE 4. LEVIES (FOR EXPORT ASSISTANCE , BEGINNING APRIL 1* CANADA, FOR THE DAIRY YEARS TO Levies Levy on within-quota deliveries per 100 kilograms b/ Levy on over-quota deliveries per 100 kilograms 8.66 Levy on liquid milk deliveries per 100 kilograms Contingency Levy per 100 kilograms a/ Effective April 13, b/ Effective October 1, c/ Effective August 1, d/ Effective August 1, 1979, applicable Export Quota Program. * The dairy year changed from April 1 t Conversions to United States currency the periods involved U.S. $ c/ c/ 0.56d/ to provinces participating in the August 1 effective August 1, is on the basis of monthly averages for

11 DPC/INV/l/Add.13 Page 11 ANNEX 1 In Tables 1 and 4 the following exchange rates were used to convert the Canadian dollar in terms of the United States dollar: April 1, 1975 to March 31, U.S October 1, 1975 to March 31, U.S April 1, 1976 to March 31, U.S April 1, 1977 to December. 31, U.S April 1, 1977 to March 31, U.S January 1, 1978 to March 31, U.S April 1, 1978 to December 31, U.S April 1, 1978 to March 31, U.S January 1, 1979 to March 31, U.S April 1, 1979 to July 31, U.S April 1, 1979 to March 31, U.S August 1, 1979 to December 31, U.S August 1, 1979 to March 31, U.S January 1, 1980 to March 31, U.S January, U.S February, U.S March, U.S April 1, U.S Yearly Averages U.S U.S U.S U.S U.S

12 OPC/INV/l/Add.13 Page 12 CANADA SCHEDULE "A" Tariff iteas date and No. of aeao. 1 Goods subject to duty and free goods 2 British preferential tariff 5 Most favoured nation tariff u General tariff 5 General preferential tariff 6 UK and Ireland Condensed ailk. the weiaht of the packaqe to be included in the weight for duty p«r pound UK and Ireland scheduled rate changes: Table 4, Line cts cts cts Evaoorated ailk. the weiqht of the Dackaoes to be UK and Ireland scheduled rate changes: Table 4, Line cts. 2.7 cts Powdered ailk. the weiaht of the packaqe to be included UK and Ireland scheduled rate changes: Table 4, Line cts. j.j C is. 5 cts. 2.8 cts. 30/6/60, Australian Trade Agreeaent.... British Preferential Note: In accordance with Article 1 of the Australian Trade Agreeaent, powdered ailk froa that country is dutiable at 1 ct. per pound, on account of the treatnent extended to importations of powdered ailk froa New Zealand. 24/5/32, Dried whev. dried skin nilk and dried buttermilk for UK and Ireland scheduled rate changes: Table 4, Line cts. 3.5 cts. " 2.8 cts /6/69, p.c. 15 p.c p.c. 15 p.c UK and Ireland scheduled rate changes: Table 4, Line cts. 7 cts cts. Ex. 24/5/32, New Zealand Trade Agreeaent When in packages weighing two pounds each, or less, the weight of such packages to be included in the weight for duty

13 DPC/INV/l/Add.13 Page 13 SCHEDULE "A" (cont'd) /6/60, DW-8 * Australian Trade Agreenent Note: In accordance with Article 1 of the Australian Trade Agreement, Cheddar cheese fro» that country is dutiable at 1 ct. per pound, on account of the treatment extended to importations of Cheddar cheese froa New Zealand. When in packages weighing two pounds each, or less, the weight of such packages to be included in the weight for duty UK and Ireland scheduled rate changes: Table 4, Line 9. 8 cts. 12 cts. 14 cts /6-/60, M-8 Australian Trade Agreement... British Preferential Note: In accordance with Article 1 of the Australian Trade Agreeaent, butter froa that country is dutiable at 5 cts. per pound, on account of the treatment extended to importations of butter froa New Zealand.»/5/32, fc * and, per pound UK and Ireland scheduled rate changes: Table 8, Line 2. UK and Ireland scheduled rate changes: Table 4, Line cts. 25 p.c. 2.5 cts p.c p.c. 2.2 cts. New Zealand Trade Agreeaent p.c Rennet casein for use in the aanufacture of buttons and, per pound (Temporary tariff itea: see Appendix 1) Free Free 27.5 p.c. Free

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