USTR files new and expanded dispute over Canada's dairy allocation rules

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The U.S. Trade Representative (USTR) has requested new dispute settlement consultations with Canada under the Canada-U.S.-Mexico trade agreement (CUSMA or USMCA).

Ambassador Katherine Tai says her office has identified additional aspects of Canada’s dairy tariff-rate quota (TRQ) allocation process that it believes are inconsistent with Canada’s obligations after initiating the latest dispute in May 2022.

The USTR says the new request expands its challenge to include Canada’s “use of a market-share approach for determining TRQ allocations,” while continuing to challenge TRQ allocation measures that “impose new conditions on the allocation and use of the TRQs, and that prohibit eligible applicants, including retailers, food service operators, and other types of importers, from accessing TRQ allocations.”

“We remain very concerned by Canada’s refusal to honour USMCA commitments,” says Tai, in a news release. “Rather than work toward meeting its obligations, Canada persists in implementing new dairy policies that are inconsistent with the USMCA, and which continue to deny U.S. workers, farmers, producers, and exporters the full benefits of market access they were initially promised.”

The Canadian government updated its regulations around dairy TRQ allocation in May following a CUSMA/USMCA dispute settlement panel ruling in January of 2022 that said Canada had not lived up to certain commitments. The USTR requested a new round of dispute settlement consultations shortly after the changes took effect, in late May. The new request, filed December 20, adds to the list of U.S. concerns.

“Our dairy farmers support thousands of communities and jobs, and at a time when global food security is under threat, it is even more important that we strengthen and maintain a strong and vibrant domestic dairy industry,” says Mary Ng, Canada’s Minister of International Trade, Export Promotion, Small Business and Economic Development, responding to the latest request.

“Dispute settlement panels have confirmed that our supply management system is in line with our international trade obligations. The terms that we negotiated under the Canada-United States-Mexico agreement are being respected and upheld,” continues Ng. “We look forward to demonstrating how Canada is meeting its CUSMA obligations during the new consultations on allocations of dairy tariff rate quotas.”

U.S. dairy groups, meanwhile, are applauding the USTR’s move.

“We thank USTR and USDA for their diligence in working to ensure that American dairy producers have the market access promised under USMCA. NMPF is committed to doing everything it can to support the case,” stated Jim Mulhern, president and CEO of the National Milk Producers Federation. “At the end of the day, if Canada continues to flagrantly flout its obligations, the U.S. government has to be ready with retaliatory measures that make the Canadian government reconsider its actions.”

If both countries aren’t able to reach a resolution through consultations, the U.S. could request the establishment of another dispute settlement panel.

Related:

U.S. dairy groups call for retaliatory tariffs against Canada under USMCA

U.S. dairy groups sour on Canada’s proposal for resolving tariff rate quota dispute

Canada provides revised dairy TRQ implementation plan to the U.S.

Both Canada and U.S. claim victory in first challenge of USMCA rules for dairy

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