In January, the United States Trade Representative’s office announced that it had won USMCA’s first-ever dispute settlement panel by prevailing in its case against Canada regarding how Canada’s U.S.-Mexico-Canada Agreement dairy tariff-rate quotas (TRQ) allocation process violated the agreement. This week, Canada submitted its proposal on how it would change tariff rate quotas for imports on dairy. Dairy groups were disappointed in the proposal and called for more reforms.
Currently, the additional Canadian tariffs typically price U.S. dairy products out of Canada’s market, making fair access to Canadian dairy TRQs vital to maximizing exports to that market. USMCA specifically requires that Canada open its TRQ application process to anyone active in the Canadian food and agriculture sector. Yet Office of the U.S. Trade Representative (USTR) noted that Canada designates the bulk of the TRQs to Canadian dairy processors who have little incentive to import, does not provide fair or equitable procedures for administering the TRQs, and does not give retailers any access to the TRQs. These measures deny the ability of U.S. dairy farmers, workers, and exporters to utilize the TRQs and realize the full benefits of the USMCA.
The National Milk Producers Federation (NMPF) and the U.S. Dairy Export Council (USDEC) rejected the proposal issued this week by Global Affairs Canada.
“Enough is enough. U.S. dairy producers are sick and tired of Canada’s game playing on dairy market access. From their irrelevant celebration that the panel upheld Canada’s right to retain a supply management system, a fact that no one has challenged and was not at issue in the USMCA case, to the continual efforts to undermine established trade commitments in order to favor Canadian dairy farmers, this pattern of behavior has gone on too long. All that American dairy farmers want is fair and good-faith implementation of USMCA’s dairy provisions. That doesn’t seem like a high bar, yet it appears to be insurmountable for Canada based on yesterday’s proposed dairy TRQ scheme changes,” said Jim Mulhern, president and CEO of NMPF. “We urge the administration to demand that Canada go back to the drawing board until it can genuinely deliver on providing the U.S. dairy industry the full benefit of USMCA.”
As the first case brought and decided under USMCA, the U.S.-Canada dairy TRQ panel is a test-case for whether or not the USMCA dispute settlement process can provide effective enforcement and deliver genuine compliance with the agreement. NMPF and USDEC said they will continue to work with the Biden administration and Congress to seek to ensure that the process provides the type of strong precedent needed for future USMCA disputes as well.
“U.S. dairy farmers and manufacturers have only limited access to the Canadian market under USMCA. That makes it essential that Canada abide by its original commitments under that agreement,” said Krysta Harden, president and CEO of USDEC. “Canada’s recent dairy TRQ proposal will not lead to that result. While it’s not surprising that Canada is trying to see just how little will be demanded of them, it’s essential that the U.S. government insist on real reforms.”