U.S. dairy groups criticize Canada's implementation of USMCA

U.S. dairy groups are accusing Canada of making it difficult for U.S. dairy exporters to take advantage of the full market access negotiated in the new North American trade deal, which takes effect on July 1.

The Canadian government published the fine print on how the allocation of its tariff-rate quotas (TRQs) will work under the Canada-U.S.-Mexico agreement this week.

The U.S. Dairy Export Council and the National Milk Producers Federation say the Canadian government is discouraging imports of high value food service or retail products into Canada, and that most of the TRQs will be given to Canadian dairy suppliers who have little incentive to import products.

“U.S. dairy farmers and cooperatives are ready to help increase deliveries of high-quality U.S. dairy products to the Canadian market, but Canada’s TRQ allocations fall far short of the full potential of its commitments under USMCA,” says Jim Mulhern, president and CEO of National Milk Producers Federation.

The U.S. groups are urging U.S. trade Representative Robert Lighthizer to immediately raise the issue with the Canadian government.

“Canada’s administration of previous TRQs under existing free trade agreements gave the U.S. dairy industry ample cause for concern, which has unfortunately been confirmed by the announced TRQ allocations,” says Tom Vilsack, president and CEO of U.S. Dairy Export Council, possibly referring to Canada’s trade deal with the European Union.

The Dairy Processors Association of Canada says it welcomes the Government of Canada’s decision to allocate a significant portion of the USMCA dairy import licenses to dairy processors. “By allocating the majority of CUSMA’s dairy import licenses (also known as tariff rate quota, or ‘TRQs’) to Canadian dairy processors, the Government plays an important role in ensuring more stability in the Canadian dairy market in the context of trade agreements and the Covid-19 pandemic,” the organization says in a press release.

Deputy Prime Minister Chrystia Freeland’s press secretary, Katherine Cuplinskas, says, “The new NAFTA is the result of three years of hard work by all Canadians. In the face of U.S. demands to dismantle supply management in Canada, we stood our ground. We preserved and protected supply management, and we have been clear that our dairy sector will be compensated as part of the new NAFTA. During the greatest economic uncertainty since the Great Depression, and at a time of mounting protectionism, it is very good news for Canada that we have secured our trading relationship with our closest trading partner and the world’s largest economy.”

“Canada’s actions place the U.S. dairy industry at a disadvantage by discouraging utilization of the full use of the TRQs and limiting the market access granted by USMCA,” says Vilsack, who served as U.S. president Barack Obama’s secretary of agriculture.

“The claims from these U.S. dairy organizations have more to do with their interest in flooding our market with American dairy, than our international commitments. This is why it is more important than ever to support our family farms and ensure they can continue to offer consumers, here at home, access to quality domestic dairy products,” says Pierre Lampron, president of the Dairy Farmers of Canada.

The deadline for applications for TRQs is June 22, 2020, while allocations will be issued on June 30, 2020.

The Canadian dairy industry has also been critical of the timeline for implementing the trade deal, as the annual dairy calendar begins on August 1. The July 1 start date means the first month will count as the first quota year under the trade deal, with access moving to the second quota year level as of August 1, 2020. The Dairy Processors Association of Canada says this will cost the Canadian dairy industry $100 million.

The USMCA opens up an additional 3.9 percent of Canada’s dairy market to imports, which the Canadian dairy industry says will cost producers and processors an estimated $330 million annually in lost market share. New rules regarding skim milk powder, milk protein concentrates, and infant formula will also reduce export opportunities for Canadian producers.

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