International trade panel favors U.S. in Canadian milk dispute
International trade panel finds Canada gave preferential treatment to its milk industry, violated terms of USMCA
U.S. Trade Representative Katherine Tai announced this week that the U.S. has won a dispute with Canada over milk and dairy product imports and exports.
If Canadian authorities follow through on their promise to correct the issue, the International Trade Commission said the move could boost U.S. dairy imports into Canada by $227 million.
According to a press release from the office of the U.S. Trade Representative, Canada was using a system of tariff-rate quotas — trade law tools that allow countries to import a set amount of specific goods at low to no tax — to lock up a portion of the dairy market specifically for Canadian dairy processors.
Canada called it part of its “supply management” system, which is the term used for the country’s complex system of quotas, import duties and other mechanisms used to support its dairy industry.
U.S. officials argued the result was an overly protected Canadian dairy market, a violation of the 2020 United States-Mexico-Canada Agreement that established trade regulations between the three countries.
North country and New York representatives took special interest in the issue when it began. Senate Majority Leader Charles E. Schumer wrote a letter to former U.S. Trade Representative Robert Lighthizer and former U.S. Secretary of Agriculture George “Sunny” Perdue in September 2020, asking the two to discuss the issue with Canadian officials.
U.S. Rep. Elise Stefanik, R-Schuylerville, in a May 2021 letter to Trade Rep. Tai requested a dispute settlement panel under the USMCA.
This is the first time that settlement panel has been used, and U.S. officials are happily announcing the resolution in their favor. Canada has been ordered to end its tariff rate-quota practices by Feb. 3 “Today’s decision is an important victory for U.S. dairy farmers,” Jim Mulhern, president of the National Milk Producers Federation, said in a U.S. Trade Representative press release. “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.”
New York’s federal officials are pleased with the development.
“I am happy to announce that, following my advocacy, north country dairy farmers will receive well-deserved access to the Canadian dairy industry after suffering from unfair restrictions,” Stefanik said in a statement.
Schumer said the panel’s decision was a “massive win” for upstate dairy farmers.
“This decision will ensure the upstate New York dairy industry fully benefits from the USMCA agreement’s expanded market access opportunities, unimpeded by unreasonable trade barriers,” he said in a statement.
Locally, dairy industry officials are excited. In an “agricultural news flash” issued by Jefferson County Economic Development, Agriculture Coordinator Jay M. Matteson said the Canadian market represented the third-largest export market for U.S. dairy products between January and October 2021, accounting for about $478 million.
“Resolution of this dispute should increase the total volume of exports into Canada,” Matteson said.
However, Matteson cautioned that this won’t directly lead to higher milk prices paid to U.S. dairy farmers.
“It is beneficial to dairy farmers, and the entire dairy industry, in creating more demand for U.S. milk,” he said. “Our dairy industry is a global industry. Dairy prices paid to farmers benefit greatly from dairy exports outside the United States, and so it is important to make certain agreements are enforced (fairly) to every country involved.”
Canadian officials acknowledged the resolution in a joint statement, claiming the decision favors Canada and includes key wins for the Canadian dairy industry.
Marie-Claude Bibeau, minister of Agriculture, and Mary Ng, minister of International Trade, Export Promotion, Small Business and Economic Development, issued a statement Tuesday.
“We are pleased with the dispute settlement panel’s report, which ruled overwhelmingly in favor of Canada and its dairy industry,” they said. “In particular, it is important to note that the panel expressly recognizes the legitimacy of Canada’s supply management system.”
The ministers said they will work with the Canadian dairy industry as they rework the supply management system to bring it into line with the trade agreement, which Canadians refer to as the Canada-U.S.-Mexico Agreement.
“Canada takes its commitments and obligations under international agreements seriously,” the ministers said. “These include those that Canada has under CUSMA with the United States, Canada’s closest trading partner.”