Dairy groups approve USTR move on dairy, urge vigilance

Trade Representative Katherine Tai on Wednesday announced that the United States is, for the second time, requesting dispute settlement consultations with Canada under the United States-Mexico-Canada Agreement (USMCA) to address dairy restrictions by Canada that the United States says are contrary to its USMCA commitments.

Specifically, the United States is challenging Canada’s dairy tariff-rate quota (TRQ) allocation measures, which deny allocation access to eligible applicants, including retailers, food service operators, and other types of importers, and impose new conditions on the allocation and use of the TRQs, USTR said in a news release.

The United States is also challenging Canada’s failure to fully allocate its annual dairy TRQs. USTR said, “Canada is instead parceling out a few months’ quota at a time. Through these measures, Canada undermines the market access that it agreed to provide in the USMCA.”

In January, a USMCA panel agreed with the United States that Canada’s allocation of dairy TRQs, specifically the set-aside of a percentage of each dairy TRQ exclusively for Canadian processors, is inconsistent with Canada’s commitment not to “limit access to an allocation to processors.”

On March 2, 2022, Global Affairs Canada initiated public consultations regarding proposed changes to its policies with respect to the allocation of Canada’s USMCA dairy TRQs and explained that the changes are intended to implement the findings of the USMCA Panel. On May 16, Canada published the changes to its policies, but the United States has rejected those changes as insufficient.

“I am deeply troubled by Canada’s decision to expand its dairy tariff-rate quota restrictions,” Tai said. “We communicated clearly to Canada that its new policies are not consistent with the USMCA and prevent U.S. workers, producers, farmers, and exporters from getting the full benefit of the market access that Canada committed to under the USMCA. We will continue to work with USDA to ensure that our dairy industry can bring a wide range of high-quality American products to Canadian customers.”

“Canada’s protectionist dairy policies are a top concern for the U.S. Department of Agriculture under the Biden-Harris administration,” Secretary of Agriculture Tom Vilsack said. “Canada has failed to honor and implement its USMCA commitments by removing the trade restrictions that disadvantage and deter U.S. dairy producers and exporters from enjoying real and meaningful access to the Canadian market. Obtaining that access remains a top priority for the administration, and we are considering all options available to achieve this objective.”

International Dairy Foods Association President and CEO Michael Dykes said that IDFA “applauds the aggressive action taken today by USTR to hold Canada accountable for trade commitments made under USMCA and refusing to administer their dairy TRQs in a manner compliant with the agreement.” But Dykes added, “However, the U.S. Government cannot allow Canada to continue to deny U.S. exporters the access it promised under the agreement. USTR, the White House, and USDA must remain vigilant and continue to expose Canada’s non-transparent, market-distorting practices at every turn when it deviates from USCMA commitments. 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. Our government officials must stay the course.”

The National Milk Producers Federation (NMPF) and U.S. Dairy Export Council (USDEC) also applauded the Biden administration action.

“Prime Minister Trudeau regularly pledges Canada supports a rules-based global order built on cooperation and partnership, yet Canada continues to flout these trade commitments and plays games rather than meet its signed treaty commitments,” said Jim Mulhern, president and CEO of NMPF. “Dairy farmers appreciate USTR’s continued dedication to aggressively pursuing the full market access expansion into the Canadian market that USMCA was intended to deliver. At the same time, given Canada’s history of persistent violations and the high likelihood Ottawa will once again disregard its USMCA obligations, USTR and USDA must be prepared to deploy the strongest-possible retaliatory measures envisioned under the USMCA should this ‘whack-a-mole’ approach continue. Canada’s actions must have consequences.”

“USTR and USDA have shown dogged determination to uphold USMCA despite Ottawa’s clear refusal to engage in real reform to come into compliance with the agreement,” said Krysta Harden, president and CEO of USDEC. “Dairy farmers and processors appreciate the clear bipartisan commitment from both the administration and Congress for enforcing the USMCA and insisting on getting the full export benefits the United States so painstakingly negotiated. If we allow Canada to simply ignore its clear obligations, it will set a dangerous and damaging precedent for future trade disputes that will reach far beyond the millions of jobs supported by the American dairy industry.”

–The Hagstrom Report

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