Dairy Foods & Beverages

Dairy associations applaud USMCA report holding Canada to its trade obligations

The USMCA panel — the first dispute panel to be established under the agreement — found elements of Canada’s TRQ administration to be in breach of commitments under the agreement.

In a joint Jan. 4 release, the International Dairy Foods Association (IDFA), the International Cheese Council of Canada (ICCC), the Dairy Companies Association of New Zealand (DCANZ) and Eucolait applauded the findings of the United States-Mexico-Canada Agreement’s (USMCA) dispute panel on Canada’s administration of its dairy tariff rate quotas (TRQs). The USMCA panel — the first dispute panel to be established under the agreement — found elements of Canada’s TRQ administration to be in breach of commitments under the agreement, the associations said, and has recommended Canada amend its TRQ allocation regulations consistent with USMCA. Canada has until Feb. 3, 2022, to respond to the panel’s findings and make its TRQ regulations consistent with USMCA.

Under USMCA, Canada committed to ensuring its TRQ administration is “fair and equitable”. However, Canada’s TRQ administration was found to discourage imports by setting aside quota allocation to be used by Canadian processors only and restricting the ability of exporters to sell directly to distributors or retailers, among other practices, the associations said. The effect of Canada’s TRQ administration and allocation has been to limit and distort the market access Canada has granted partners under its agreements. For instance, under USMCA an average of 68% of dairy quotas have been filled in its second year of implementation, while under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), only 8% of dairy quotas on average have been filled in its third year of implementation.

“IDFA applauds the U.S. government’s commitment to ensuring Canada’s dairy trade obligations are upheld,” said Michael Dykes, president and CEO of Washington, D.C.-based IDFA. “IDFA is pleased to join our global dairy industry partners today in welcoming the USMCA panel’s findings and promoting Canadian dairy policy accountability.”

The USMCA’s final panel report may be viewed here.

Global dairy industry associations are also awaiting the outcomes of Canada’s TRQ administration and allocation review, started in 2019, which has been on hold since early 2020, the associations said.

In a separate statement, the U.S. Dairy Export Council (USDEC) and National Milk Producers Federation (NMPF) also applauded the report.

“The United States and Canada negotiated specific market access terms covering a wide variety of dairy products, but instead of playing by those mutually agreed upon rules, Canada ignored its commitments. As a result, U.S. dairy farmers and exporters have been unable to make full use of USMCA’s benefits,” said Jim Mulhern, president and CEO of Arlington, Va.-based NMPF. “Today’s decision is an important victory for U.S. dairy farmers and the millions of Americans whose jobs are tied to the U.S. dairy industry. America’s dairy farmers appreciate the Biden Administration’s dedication to preserving dairy export opportunities and the many members of Congress that have also stressed the importance of aggressive enforcement of dairy access rights in our trade agreements.”

Krysta Harden, president and CEO of Arlington, Va.-based USDEC, thanked Ambassador Katherine Tai for launching the dispute settlement process and Congressional leaders for supporting the need to uphold USMCA’s dairy provisions.

“We expect Canada to abide by its trade commitments so that the American dairy industry can fully access the Canadian markets just as USMCA promised," she said. “While this is an essential victory, it is one step in a much longer journey. Our work to uphold the full benefits of USMCA continues, as we strive to reduce supply chain disruptions for our exports and ensure Mexico’s adherence to the dairy provisions of the USMCA, among other key matters.”