United States Trade Representative Robert E. Lighthizer announced that the United States is exercising its rights under the United States-Mexico-Canada Agreement (USMCA) to address measures adopted by the Government of Canada that are contrary to the provisions of the agreement and harm U.S. dairy farmers.
Specifically, the United States is challenging Canada’s allocation of dairy tariff-rate quotas (TRQs). By setting aside and reserving a percentage of each dairy TRQ exclusively for processors, Canada has undermined the ability of American dairy farmers and producers to utilize the agreed-upon TRQs and sell a wide range of dairy products to Canadian consumers.
Lighthizer said, “Canada’s measures violate its commitments and harm U.S dairy farmers and producers. We are disappointed that Canada’s policies have made this first ever enforcement action under the USMCA necessary to ensure compliance with the agreement. This action demonstrates that the United States will not hesitate to use all tools available to guarantee American workers, farmers, ranchers, and businesses enjoy the benefits we bargained for.”
Lighthizer provided official notice to Canada that it was exercising its rights to enforce the USMCA in a letter to Canada’s Minister of Small Business, Export Promotion and International Trade Mary Ng. If the United States and Canada are not able to resolve the United States’ concerns through consultations, the United States may request the establishment of a USMCA dispute settlement panel to examine the matter.
Dairy groups applauded the announcement. The U.S. Dairy Export Council and the National Milk Producers Federation have long raised the alarm about the need to ensure the USMCA is fully enforced, due to Canada’s history of undermining its trade commitments.
“USMCA is designed to improve trade with Canada, while modifying some of Canada’s trade-distorting dairy policies. We knew from day one that enforcement would be key to bringing the intended benefits home to America’s dairy industry. I applaud USTR for hearing our concerns and relying on our guidance to take this critical enforcement step to ensure that the agreement is executed in both letter and spirit,” said Tom Vilsack, president and CEO of USDEC. “This is the critical first step, but more work may be needed to ensure Canada complies with its Class 7 related USMCA commitments as well.”
Even prior to its entry into force, USDEC and NMPF monitored Canada’s actions regarding its USMCA commitments and urged Congress and the administration to make this a priority as soon as USMCA entered into force. Canada has distorted its TRQ administration to limit imports from the U.S. Earlier this year, USDEC and NMPF highlighted for USTR and the U.S. Department of Agriculture (USDA) the inconsistencies between Canada’s dairy TRQ allocations and Canada’s USMCA obligations. In a detailed filing submitted to the administration, NMPF and USDEC provided the agencies with a specific legal review of the Canadian TRQ system and an explanation of the negative impacts resulting from them.
“Only when Canada is held fully accountable to its trade commitments will America’s dairy farmers be able to realize the full benefit of the provisions that the U.S. government worked so hard to secure,” said Jim Mulhern, president and CEO of NMPF.
The concerns raised by USDEC and NMPF have been echoed by a broad bipartisan coalition of members of Congress. In August, 104 Representatives sent a letter to USTR and USDA asking for Canada to be held accountable to its trade promises while a letter in the Senate was signed by 25 Senators.