NMPF Push on Canadian USMCA Compliance Results in Second USTR Case on Dairy Access

NMPF’s championing of the need to use the full arsenal of U.S.-Mexico-Canada (USMCA) agreement enforcement tools to tackle Canada’s lack of compliance with its dairy market access obligations saw USTR launch an additional dispute settlement case on May 25. Just over a week prior, on May 16, Canada published as final a revised set of USMCA dairy tariff rate quota (TRQ) rules, which failed to fix its USMCA-violating practices. To address the additional problems Canada’s revised approach has raised and to defend the integrity of the agreement, the U.S. Trade Representative’s Office announced it was bringing an additional case.

“Prime Minister Trudeau regularly pledges Canada supports a rules-based global order built on cooperation and partnership, yet Canada continues to flout these trade commitments and plays games rather than meet its signed treaty commitments,” said Jim Mulhern, president and CEO of NMPF. “Dairy farmers appreciate USTR’s continued dedication to aggressively pursuing the full market access expansion into the Canadian market that USMCA was intended to deliver. At the same time, given Canada’s history of persistent violations and the high likelihood Ottawa will once again disregard its USMCA obligations, USTR and USDA must be prepared to deploy the strongest-possible retaliatory measures envisioned under the USMCA should this ‘whack-a-mole’ approach continue. Canada’s actions must have consequences.”

The latest step came after repeated meetings by NMPF and USDEC staff with USDA and U.S. Trade Representative officials to urge further action in anticipation of Canada’s announcement that it would make only minor cosmetic changes to its dairy USMCA tariff-rate quota (TRQ) system. Those changes fall well short of the reforms both organizations have insisted are needed for Canada to meet its commitments under the trade agreement.

A USMCA dispute settlement panel, initiated by the U.S. government at NMPF’s urging, found in January that Canada has not complied with its dairy market access commitments. Canada responded to the ruling in March with a proposal to “modify” its dairy TRQs, which NMPF and USDEC soundly rejected as it failed to incorporate real reforms. Despite the subsequent rejection from the Administration and Congress, Canada forged ahead on May 16 in publishing the TRQs without any consequential changes. In response, USTR indicated its intent to challenge those new rules.

Canada’s dairy TRQ system is also facing a dispute settlement process initiated by New Zealand under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a process that echoes some of the concerns raised by the U.S. government.

NMPF, Congress Demand Canada Meet USMCA Commitments

NMPF soundly rejected a Canadian proposal to “modify” its dairy tariff rate quota (TRQ) administration process in joint comments with USDEC to the Canadian government on April 19. The action follows a January dispute settlement ruling that Canada is not abiding to its market access commitments in the U.S.-Mexico-Canada Agreement (USMCA).

NMPF’s comments outline how Canada’s TRQs fail to fulfill its dairy obligations including how Canada limits proposed TRQ allocations to Canadian processors and distributors based on dairy sales; how Canada excludes other dairy purchasers such as retailers from the system; and Canada’s lack of good regulatory practices designed to encourage effective use of the TRQs allocated to a given company.

NMPF called on Canada to “consider its larger interests” in the success of USMCA and modify its dairy TRQ allocation and administration policies to show its good faith toward USMCA.

Complementing this effort, NMPF worked with leading members of the U.S. House of Representatives on an April 5 bipartisan letter to Ambassador Katherine Tai and Secretary Tom Vilsack calling on the Biden administration to reject the proposal and ensure U.S. dairy producers are extended the market access that had been negotiated.

The letter was sent by Reps. Ron Kind (D-WI), Tom Reed (R-NY), Antonio Delgado (D-NY), Glenn Thompson (R-PA), Suzan DelBene (D-WA), Dusty Johnson (R-SD), Jim Costa (D-CA), and David Valadao (R-CA), the same congressional leaders who successfully urged USTR to launch a dispute settlement case against Canada in May 2021.

“A deal’s a deal; it’s not too much to ask that our trading partners live up to their end of the bargain,” the letter stated. “That is why it is critical that this compliance stage of the USMCA dairy case demonstrate that the USMCA enforcement process works—not just to deliver the right finding, as it did in January, but to ensure faithful implementation of the overall agreement and drive real, tangible reforms that are seen on store shelves, to the benefit of American dairy producers and manufacturers, as intended.”

The House letter follows a March 4 letter from Rep. Elise Stefanik (R-NY) to Ambassador Tai sharply criticizing the Canadian proposal. A similar bipartisan, bicameral letter was sent on April 6 from members of the Minnesota Congressional delegation, led by Rep. Michelle Fischbach (R-MN) and Sen. Amy Klobuchar (D-MN). Sen. Tina Smith (D-MN) and Reps. Tom Emmer (R-MN), Angie Craig (D-MN) and Pete Stauber (R-MN) also joined the letter.

NMPF continues to work with these and other congressional offices to help ensure that Canada is held to account so that U.S. dairy farmers can reap USMCA’s full promised benefits.