FarmFirst Dairy Cooperative is elated at the decision of the USMCA Dispute Settlement Panel, which found Canada is improperly restricting access to its market for U.S. dairy products in violation of its USMCA tariff-rate quotas commitments.
“This landmark decision is a victory for all U.S. dairy, including farmers, processors and exporters,” says John Rettler, dairy farmer from Neosho and president of FarmFirst. “The dairy provisions in the USMCA were heavily discussed and hard-fought by our U.S. trade ambassadors. The decision today should send a clear message to Canada to follow through on the agreements they make, and to be an honest trading partner.”
TRQs are a system of tariffs negotiated between countries that allow a predetermined quantity of imports at a specified tariff rate, where that rate is often at or near zero. Any additional imports above that predetermined quantity are subject to significantly higher tariffs. In the case of U.S. dairy products, these additional Canadian tariffs typically price U.S. dairy products out of Canada’s market, making fair access to Canadian dairy TRQs (imports at near zero tariff rate) vital to maximizing exports to that market.
When the Office of the U.S. Trade Representative brought the case in May 2021, it argued that Canada has maintained dairy TRQ measures that run counter to its market access obligations under USMCA. USMCA specifically requires that Canada open its TRQ application process to anyone active in the Canadian food and agriculture sector. Yet USTR noted that Canada designates the bulk of the TRQs to Canadian dairy processors who have little incentive to import, does not provide fair or equitable procedures for administering the TRQs, and does not give retailers any access to the TRQs. These measures deny the ability of U.S. dairy farmers, workers, and exporters to utilize the TRQs and realize the full benefits of the USMCA, FarmFirst explains.
While the U.S. tried to resolve the matter through consultations with Canada before initiating the Dispute Settlement Panel, Canada refused to change its policies. With broad bipartisan support from more than 125 members of the House and Senate, the matter was brought to the USMCA Dispute Settlement Panel. There, a panel of legal experts evaluated Canada’s current dairy trade policies against its commitments under USMCA and found Canada was not meeting its USMCA obligations.
Canada has until Feb. 3 to comply with the decision or face U.S. retaliation.
See the panel’s report: https://ustr.gov/sites/default/files/enforcement/USMCA/Canada%20Dairy%20TRQ%20Final%20Panel%20Report.pdf
