Canada dairy farmers content as TPP deal keeps system intact

WINNIPEG, Manitoba (Reuters) - Canadian dairy farmers are breathing easier after 12 countries struck a Trans-Pacific Partnership deal on Monday that keeps their protectionist system intact and the government offered billions in compensation for new imports.

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Canada will allow TPP countries over five years to provide 3.25 percent annually of its dairy supply, and about 2 percent of eggs, chicken and turkey. That’s a far cry from earlier demands by the United States, Australia and New Zealand for Canada to phase out its system of supply, price and import controls.

“It’s a relief for producers right across the country that there’s no negative impact,” said Wally Smith, president of Dairy Farmers of Canada, the main dairy lobby group, in an interview. “Farmers have been contacting me saying this is good news because they can get on with their life.”

The Conservative government, facing election Oct. 19, promised C$4.3 billion ($3.28 billion) in compensation to supply-managed farmers over 15 years. Prime Minister Stephen Harper said the package would not buy production quotas from farmers to reduce domestic supplies.

A typical dairy farm will collect about C$166,000.

Even so, there are key differences between production methods in Canada and the United States.

U.S. farms can inject the hormone recombinant bovine somatotropin (rBST) into cattle to increase milk production, but it is banned for use in Canada. There is no restriction, however, on import or sale of milk from cows treated with rBST, according to the Canadian government.

If consumers are concerned, they should buy visibly marked Canadian products, Smith said.

The United States also will eliminate tariffs on some specialty cheeses. Canadian dairy Saputo Inc SAP.TO said on Monday that it acquired specialty cheese maker Woolwich Dairy.

For Canadian crop and meat producers, the deal lowers tariffs to major buyer Japan.

Japan currently buys canola seed, but its 15 percent tariffs prevent more lucrative trade in canola oil processed by Bunge Ltd BG.N, Cargill Ltd [CARGIL.UL] and Richardson International, said Patti Miller, president of Canola Council of Canada.

Tariffs on canola oil and meal will be eliminated in Japan and Vietnam over five years, boosting trade by C$780 million annually, Miller said.

Wheat that feeds animals will become duty-free in Japan, while tariffs on wheat for human consumption will fall 45 percent over eight years.

Japan’s 38.5 percent tariff on Canadian beef will drop to 9 percent in 15 years, while tariffs on pork are reduced or eliminated over 10 years.

Reporting by Rod Nickel in Winnipeg, Manitoba; Additional reporting by David Ljunggren in Ottawa; Editing by Meredith Mazzilli