In a ruling announced Friday, a U.S-Mexico-Canada Agreement dispute panel allowed Canada to restrict the dairy access that the United States negotiated for in the agreement.
An earlier panel ruled in January 2022 that Canada had improperly restricted access to U.S. dairy products. In response, Canada made inadequate changes to its dairy tariff rate quota (TRQ) system, resulting in a second challenge by the United States. The decision means Canada is not obligated to make further changes, which the National Milk Producers Federation says disappoints U.S. dairy farmers and exporters.
“It is profoundly disappointing that the dispute settlement panel has ruled in favor of obstruction of trade rather than trade facilitation,” said Jim Mulhern, president and CEO of NMPF. “Despite this independent panel’s adverse ruling, we’d like to thank the Biden Administration and the many members of Congress who supported us for their tireless pursuit of justice for America’s dairy sector. We urge Ambassador Tai and Secretary Vilsack to look at all available options to ensure that Canada stops playing games and respects what was negotiated.”
Since the U.S. Trade Representative initially launched the first dispute settlement case against Canada in 2021, USDEC and NMPF have worked with USTR, USDA, and Congress to try to secure full use and value of USMCA’s dairy TRQs for American dairy producers and processors.
“By allowing Canada to ignore its USMCA obligations, this ruling has unfortunately set a dangerous and damaging precedent,” said Krysta Harden, president and CEO of the U.S. Dairy Export Council. “We do however want to express our appreciation for allies in Congress and the Administration for their efforts and commitment to fighting for U.S. dairy. This is unfortunately not the only shortcoming in Canada’s compliance with its international commitments. We are committed to working with USTR and USDA to evaluate efforts to address Canada’s continued harmful actions that depress dairy imports while simultaneously evading USMCA’s dairy export disciplines.”
When first implemented in 2020, USMCA established 14 different TRQs, which allow a predetermined quantity of imports at a specified low tariff rate. The TRQ system that Canada implemented awarded the vast majority of TRQ volumes to Canadian processors and granted very limited access to TRQs to distributors — resulting in limited market access for U.S. exporters. Minor modifications to that system made in 2022 have continued that imbalanced approach.
The USDA’s hearing on modernizing the Federal Order system reconvenes this week in Carmel, Indiana, where witnesses will explore NMPF’s recommended updates to Class I differentials.
The House and Senate return to Washington this week, where lawmakers will continue working on funding bills for the coming year, including a possible supplemental spending bill for Ukraine and Israel.
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