What's Trump's problem with Canada's milk?

U.S President Donald Trump's speech railing against NAFTA on Tuesday specifically targeted Canada's dairy production system. But it's far from the first time Canadian milk has drawn American ire. What's this system that everyone keeps getting so upset about?

It's called supply management

Canada has used a supply management system to control dairy production since the early 1970s. Essentially, the amount of milk and dairy products produced by farmers across the country is regulated by quotas meant to ensure the national supply matches the expected demand as closely as possible.

The Canadian Dairy Commission, which works with the provincial milk marketing boards to co-ordinate quotas and pricing, says the system helps to avoid surpluses as well as shortages.

In addition, Canada's producers recently got together and lowered their prices for dairy ingredients to make them more competitive against the cheaper American imports.

Why does the U.S. care so much about it?

The U.S. dairy industry has complained that the ultra-filtered milk policy, as well as Canada's dairy supply management controls as a whole, are contrary to free-market principles and don't let U.S. farmers compete fairly.

In January, U.S. dairy and agricultural associations wrote to Trump asking him to take action against Canada's dairy practices, saying they were "resulting in lost revenues and jobs for dairy farmers and processors across the United States." They also accused Canada of violating its global trade obligations.

In a fiery speech to factory workers in Wisconsin on Tuesday, Trump vowed to "stand up for our dairy farmers" in the state. The president also called Canada's dairy system a "one-sided deal," saying the North American Free Trade Agreement rules between Canada and the U.S. were "a complete and total disaster" overall.

What's Canada's response to the criticism?

David MacNaughton, Canada's ambassador to the U.S., rejects the accusations.

"Canada does not accept the contention that Canada's dairy policies are the cause of financial loss for dairy farmers in the United States," MacNaughton wrote in a letter to the governors of Wisconsin and New York that was released Tuesday night, after Trump's criticism.

"The facts do not bear this out."

Earlier this month, Isabelle Bouchard, spokesperson for the Dairy Farmers of Canada, said Canada was being used as "a scapegoat" for the financial woes facing dairy farmers in the U.S.

In response to Trump's comments on Tuesday, Bouchard said her organization was "confident the Canadian government will continue to defend the Canadian dairy industry."

Supply management does have critics within Canada who believe it's not only a problem in international trade negotiations but also results in higher costs for consumers and the food industry in general.

But the only Canadian politician who's actively opposed the marketing board system is Conservative leadership candidate Maxime Bernier, contradicting not only his party's most recent policy vote but also his past statements as a cabinet minister.

After Tuesday's remarks by the U.S. president, Bernier wrote Trump an open letter saying he "stole one of my best lines" about the unfairness of Canada's system, which Bernier characterized as a "cartel" and a "production racket."

Bernier encouraged Trump to continue to push the Canadian government to open its agricultural markets. But he also pointed out that the U.S. is being protectionist on other fronts.

"You're known as a tough negotiator, Mr. President," he wrote. "But the best way to negotiate in the best interest of your own people would be to do the same thing with your softwood lumber market, not to succumb to protectionist nonsense. Deal?"