Both Canada and the U.S. are claiming victory in a panel ruling that upheld Canada’s supply management system for dairy, but found Canada’s handling of tariff rate quotas (TRQs) for processors in violation of Article 3 of the United States Canada Mexico Agreement (USMCA).

The dispute is the first test of the USMCA agreement for dairy. The challenge, under Chapter 31, was launched by the U.S. in May 2021.

Trade minister Mary Ng tweeted that she and Minister of Agriculture, Marie-Claude Bibeau are “pleased” with the dispute settlement.

In a press release, Ng says, “We are pleased with the dispute settlement panel’s report, which ruled overwhelmingly in favour of Canada and its dairy industry… The panel also confirms that Canada has the discretion to manage its TRQ allocation policies under CUSMA in a manner that supports Canada’s supply management system.”

The panel’s decision includes the statement that reserving access of 85 to 100 per cent of 14 separate TRQs is “inconsistent with Article 3.A.2.11 (b),” ruling that this constitutes limiting to processors, a no-no under the agreement.

“We have taken note of the panel’s finding regarding Canada’s practice of reserving TRQ pools for the use of dairy processors. Our government, as it proceeds with the next steps in the process, will continue to work closely with the Canadian dairy industry. Canada takes its commitments and obligations under international agreements seriously. These include those that Canada has under CUSMA with the United States, Canada’s closest trading partner,” Ng’s announcement says.

The U.S. National Milk Producers Federation (NMPF) sees the ruling as a clear win for its members, calling the panel’s decision a “triumph.”

“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,” says Jim Mulhern, president and CEO of NMPF, in a statement. “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.”

Read more on the decision from the U.S. point of view, here.

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