Canada responds to USMCA dairy case; US government, industry displeased

The Canadian government said today it had published new dairy tariff rate quota (TRQ) policies in reaction to the case the United States brought against Canadian dairy policy under the U.S.-Mexico-Canada Agreement, but Agriculture Secretary Tom Vilsack said the announcement was “disappointing” and “inadequate,” while U.S. dairy industry leaders called on the Biden administration to impose retaliatory tariffs on Canada.

Mary Ng, the Canadian minister of international trade, export promotion, small business and economic development, said that the USMCA dispute settlement panel’s report “ruled in favour of Canada in a majority of the claims,” and that the new policies address “the sole finding” that Canada’s practice of reserving TRQ pools exclusively for the use of dairy processors is inconsistent with the agreement.

“The new policies end the use of processor-specific TRQ pools,” Ng said.

She added that Canada “has the full discretion to administer its TRQs under CUSMA [the Canadian acronym for the Canada-U.S.-Mexico Agreement] in a manner that supports Canada’s supply management system for dairy.”

“We will always stand up for its dairy industry, farmers and workers and the communities they support, and at a time when global food security is under threat, it is even more important that we strengthen and maintain a strong and vibrant domestic dairy industry,” Ng added.

Agriculture Secretary Tom Vilsack meets with the Canadian Minister of Agriculture Marie-Claude Bibeau at the G7 Agriculture Ministerial in Stuttgart, Germany, on Friday to discuss both global and bilateral issues.

In a call to reporters from Poland after meeting with G7 leaders about the Ukraine situation, Vilsack said he had had a “very frank and specific conversation” with Canadian Minister of Agriculture and Agri-Food Marie-Claude Bibeau to tell her “how inadequate” the response was, and that the United States was “greatly disappointed” that the new quotas do not include retailers.

Vilsack added, “There is no distance” between USDA, the Office of the U.S. Trade Representative and the U.S. dairy industry in reaction to the Canadian response.

But asked about U.S. dairy groups calling today for retaliatory tariffs against Canada, Vilsack said “the first step was to convey the level of dissatisfaction.”

“I am hopeful that the nature of my conversation with the Canadian minister underscores the initial level of disappointment,” Vilsack said, adding that he believes Bibeau “is capable of reading between the lines about what’s next.”

International Dairy Foods Association (IDFA) President and CEO Michael Dykes, who represents dairy processors, said today “This outcome is completely unacceptable.”

“Canada’s publication today clearly shows they are ignoring their trade commitments agreed to in the USMCA and refusing to administer their dairy TRQs in a manner compliant with the agreement

“The U.S. dairy industry has made clear from the start that U.S. dairy exporters demand real TRQ reform that will permit the market access Canada agreed to. The U.S. met with Canada a week ago on this very matter and expected a good faith effort.

“Instead, Canada continues to deny U.S. dairy products from reaching their full capacity under the terms of the deal and continues to deny the existence of any obligations. IDFA thoroughly rejects the Canadian policy published today and demands a swift response from USTR,” Dykes said.

The National Milk Producers Federation (NMPF) and the U.S. Dairy Export Council (USDEC) called on the U.S. government to levy retaliatory tariffs on Canada.

“Canada made a clear choice to thumb its nose at both the United States government and its international treaty obligations,” said NMPF President and CEO Jim Mulhern. “It has completely disregarded the USMCA agreement signed just a few short years ago.”

“Ottawa’s decision today is clearly designed to test our resolve by doubling down on its longstanding dairy trade violations, ignoring both the spirit and the letter of its trade agreements. That decision demands retaliatory action by the U.S. government. Otherwise, our trade agreements will be seen as toothless before the ink is dry,” Mulhern said.

“USTR, USDA and scores of members of Congress from both side of the aisle have worked diligently to ensure American dairy farmers and manufacturers benefit from USMCA,” said USDEC President and CEO Krysta Harden. “They deserve our deepest thanks for bringing us this far.”

“Unfortunately, Canada simply refuses to institute real reform, and such actions must have consequences. Retaliatory tariffs are both fair and necessary in this circumstance, as clearly provided for by USMCA,” Harden said.

–The Hagstrom Report

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