In a move with overwhelming support by the dairy industry, the United States took the necessary steps in starting a dispute settlement panel under the United States-Mexico-Canada Agreement.
United States Trade Representative Katherine Tai announced that the United States will review measures adopted by the Government of Canada that undermine the ability of American dairy exporters to sell a wide range of products to Canadian consumers.
The United States is challenging Canada’s allocation of dairy tariff-rate quotas (TRQs), specifically the set-aside of a percentage of each dairy TRQ exclusively for Canadian processors. These measures deny the ability of U.S. dairy farmers, workers, and exporters to utilize the TRQs and realize the full benefit of the USMCA.
“A top priority for the Biden-Harris Administration is fully enforcing the USMCA and ensuring that it benefits American workers,” said Ambassador Tai. “Launching the first panel request under the agreement will ensure our dairy industry and its workers can seize new opportunities under the USMCA to market and sell U.S. products to Canadian consumers.”
A tariff-rate quota applies a preferential rate of duty to an “in-quota” quantity of imports and a different rate to imports above that in-quota quantity. Under the USMCA, Canada has the right to maintain 14 TRQs on dairy products.
In notices to importers that Canada published in June and October 2020 and May 2021 for dairy TRQs, Canada sets aside and reserves a percentage of the quota for processors and for so-called “further processors”, contrary to Canada’s USMCA commitments. This restriction undermines the value of Canada’s dairy TRQs for U.S. farmers and exporters by limiting their access to in-quota quantities negotiated under the USMCA.
Back in December of 2020, the United States first requested consultations with Canada. However, the two countries were not able to resolve the dispute during the meeting.
This is the first panel request ever filed under Chapter 31 (Dispute Settlement) of the USMCA. Under the USMCA’s revised dispute settlement procedures, the panel is established upon delivery of the request. Under the timeline provided in the USMCA, the panel is expected to issue a report later this year.
Agriculture Secretary Tom Vilsack said, “This is an important step for American agriculture, and one that brings the U.S. dairy sector closer to realizing the full benefits of the USMCA. Ambassador Tai’s action today will help ensure that Canada upholds its commitments under the USMCA and puts our other agricultural trading partners on notice that they must play by the rules. I am hopeful of a swift resolution that allows Canadian consumers access to high-quality U.S. dairy products and delivers the economic opportunities promised under USMCA to U.S. dairy farmers.”
Krysta Harden, U.S. Dairy Export Council President and CEO said, “We have had long-standing and well-founded concerns that Canada undermines its trade agreements when it comes to dairy. Our trading partners need to know that failure to meet their agricultural trade commitments with the United States will result in robust action to defend U.S. rights – today’s action demonstrates just that. The expansion of dairy market access opportunities is critical for our industry. Today’s action is a critical step toward maximizing current export opportunities while sending a strong message in defense against the erection of future barriers in Canada and other markets as well.”