Dairy has become the first issue under the new NAFTA to be challenged with potential enforcement action.

As expected, the U.S. Trade Representative (USTR) on Wednesday announced it is seeking consultations with Canada regarding the allocation of the dairy tariff rate quotas (TRQs) for market access negotiated in the USMCA.

“Canada’s measures violate its commitments and harm U.S dairy farmers and producers,” argues U.S. Trade Representative Robert Lighthizer, in a statement issued by the USTR office. “We are disappointed that Canada’s policies have made this first ever enforcement action under the USMCA necessary to ensure compliance with the agreement. This action demonstrates that the United States will not hesitate to use all tools available to guarantee American workers, farmers, ranchers, and businesses enjoy the benefits we bargained for.”

Like most trade disputes, there are two sides of the disagreement. The Canadian dairy industry saw this complaint coming and is not backing down.

“The TRQ allocations by the federal government are consistent with the terms of the agreement. Anyone who reads the text of CUSMA would see this, but the outgoing administration may feel that, by taking this approach, it will endear itself with family-owned dairy farms in the U.S.,” Jacques Lefebvre, CEO of the Dairy Farmers of Canada, told RealAgriculture following the USTR announcement.

Earlier this week, Canada’s Minister of Small Business, Export Promotion and International Trade Mary Ng also said Canada’s administration of the dairy TRQs is in full compliance with the new NAFTA.

U.S. dairy groups, including the U.S. Dairy Export Council and the National Milk Producers Federation, have been calling for the action since summer, and are applauding the move. Back in August, more than two dozen senators also signed a letter urging USDA and USTR to act on the matter. Enforcement mechanisms in the USMCA were a big priority at the USTR throughout the negotiations and have bipartisan support in the House of Representatives and Senate.

There’s also bipartisan support on the dairy issue in the U.S., highlighted by the fact current U.S. Dairy Export Council president and CEO Tom Vilsack will reportedly be re-named U.S. agriculture secretary by President-elect Joe Biden. He previously served as ag secretary for eight years in the Obama administration.

Vilsack’s colleague was on RealAg Radio on Wednesday.

“They (Canada) have limited the opportunity that U.S. companies have to sell particular products to anyone in Canada,” said Jaime Castaneda, vice-president of U.S. Dairy Export Council, noting the U.S. dairy industry was aware of how TRQs were handled by Canada in the Canada-EU agreement and attempted to address it in the USMCA, but was “surprised” that Canada is making the same attempts.

Consultations serve as the initial step in the dispute settlement process under the USMCA. Canada now has 15 days to respond regarding any complaints about perishable items, such as milk, and 30 days to respond for other products. If the countries fail to reach a deal through consultations, the complainant can request the creation of a dispute settlement panel to examine the matter.

You can read the USTR’s consultation request here.

Hear the full discussion with Jaime Castaneda of the U.S. Dairy Export Council for the American side of the argument. 

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