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Under USMCA, U.S. Begins Trade Dispute Process Against Canadian Dairy Quotas

Wall Street Journal writer Josh Zumbrun reported on Tuesday that, “The Biden administration initiated a dispute process against the Canadian dairy industry, triggering the formal dispute mechanism of the new U.S.-Mexico-Canada Agreement for the first time.

“The U.S. dairy industry has long complained about policies in Canada that prevent sales in their market, and the issue has won the support of many members of Congress who represent the major dairy-producing states. Canada’s dairy protection was one of the key sticking points of the negotiations over the USMCA which was agreed to in 2018, and the U.S. dispute amounts to a formal accusation that Canada isn’t living up to the terms of the agreement.

“‘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,’ said Katherine Tai, the U.S. trade representative and President Biden’s top trade adviser, on Tuesday.”

2020 United States Agricultural Export Yearbook. USDA- Foreign Agricultural Service (April 5, 2021).

The Journal article noted that,

The U.S. alleges that Canada has used a complex system of tariff-rate quotas that sets aside a share of the dairy market exclusively for Canadian dairy processors, and that the system is in violation of what Canada agreed to in 2018.

“The complaint predates the Biden administration—in December of 2020, the Trump administration filed the initial complaint, and the U.S. and Canada discussed the complaint in December, but failed to resolve the issue.

“The U.S. is now escalating the dispute by requesting the creation of a formal dispute settlement panel. The panel would hold hearings to understand the issue and release a report later this year. If the U.S. prevails, Canada would then have to bring its practices into compliance. If they didn’t, the U.S. would eventually be able to impose tariffs.”

Also this week, Bloomberg writer Ana Monteiro reported that, “The U.S. moved to set up a dispute-settlement panel to review Canada’s dairy quotas, which Washington alleges undermine the ability of American dairy exporters to sell a wide range of products to Canadian consumers.

“The U.S. is challenging Canada’s tariff-rate quotas, or TRQs, which apply a preferential duty rate to a certain quantity of imports and a different rate to imports above that quantity. Specifically, the U.S. is questioning the set-aside of a percentage of each dairy quota exclusively for Canadian processors, and the U.S. has requested a panel under the U.S.-Mexico-Canada Agreement to review the measures, the Office of the U.S. Trade Representative said in a statement Tuesday.”

The Bloomberg article noted that, “Canadian Trade Minister Mary Ng said the nation is ‘disappointed‘ with the U.S.’s request for a dispute panel.”

2020 United States Agricultural Export Yearbook. USDA- Foreign Agricultural Service (April 5, 2021).

The Bloomberg article added that, “Canada’s dairy industry said its quotas are in line with the trade agreement, and the government has a solid case to present to the panel, said Pierre Lampron, president of Dairy Farmers of Canada.”

Keith Good Photo

Keith Good is the Farm Policy News editor for the farmdoc project. He has previously worked for the USDA’s National Agricultural Statistics Service, and compiled the daily News Summary from 2003-2015. He is a graduate of Purdue University (M.S.- Agricultural Economics), and Southern Illinois University School of Law.

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