NMPF and USDEC Slam Canadian Proposal on USMCA Dairy Market Access

The National Milk Producers Federation (NMPF) and the U.S. Dairy Export Council (USDEC) rejected a proposal issued late yesterday by Global Affairs Canada that outlines the Canadian “changes” to their current scheme for allocating U.S.-Mexico-Canada Agreement (USMCA) dairy tariff-rate-quotas (TRQ).

In January the United States Trade Representative’s office announced that it had won USMCA’s first-ever dispute settlement panel by prevailing in its case against Canada regarding how Canada’s USMCA dairy TRQ allocation process violated the agreement. Ambassador Tai noted at the time that, “This historic win will help eliminate unjustified trade restrictions on American dairy products and will ensure that the U.S. dairy industry and its workers get the full benefit of the USMCA to market and sell U.S. products to Canadian consumers.”

“Enough is enough. U.S. dairy producers are sick and tired of Canada’s game playing on dairy market access. From their irrelevant celebration that the panel upheld Canada’s right to retain a supply management system, a fact that no one has challenged and was not at issue in the USMCA case, to the continual efforts to undermine established trade commitments in order to favor Canadian dairy farmers, this pattern of behavior has gone on too long. All that American dairy farmers want is fair and good-faith implementation of USMCA’s dairy provisions. That doesn’t seem like a high bar, yet it appears to be insurmountable for Canada based on yesterday’s proposed dairy TRQ scheme changes,” said Jim Mulhern, president and CEO of NMPF. “We urge the administration to demand that Canada go back to the drawing board until it can genuinely deliver on providing the U.S. dairy industry the full benefit of USMCA.”

“U.S. dairy farmers and manufacturers have only limited access to the Canadian market under USMCA. That makes it essential that Canada abide by its original commitments under that agreement,” said Krysta Harden, president & CEO of USDEC. “Canada’s recent dairy TRQ proposal will not lead to that result. While it’s not surprising that Canada is trying to see just how little will be demanded of them, it’s essential that the U.S. government insist on real reforms.”

As the first case brought and decided under USMCA, the U.S.-Canada dairy TRQ panel is a test-case for whether or not the USMCA dispute settlement process can provide effective enforcement and deliver genuine compliance with the agreement. NMPF and USDEC will continue to work with the Biden administration and Congress to seek to ensure that the process provides the type of strong precedent needed for future USMCA disputes as well.

U.S. Wins USMCA Dispute with Canada Over Dairy Market Access

More than a year of work from NMPF and the U.S. Dairy Export Council (USDEC) reaped dividends for dairy Jan. 4, as a landmark decision found that Canada is improperly restricting access to its market for U.S. dairy products and violating its U.S.-Mexico-Canada Agreement (USMCA) tariff-rate quota (TRQs) commitments.

The case, the first of any kind brought before a USMCA Dispute Settlement Panel, was launched with broad bipartisan support last May after months of urging from NMPF and USDEC, which is urging Canada to comply swiftly with the panel’s ruling.

“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. As a result, U.S. dairy farmers and exporters have been unable to make full use of USMCA’s benefits,” said Jim Mulhern, president and CEO of NMPF, calling the decision” an important victory for U.S. dairy farmers and the millions of Americans whose jobs are tied to the U.S. dairy industry.”

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 vital to maximizing exports to that market.

When the Office of the U.S. Trade Representative (USTR) brought the case in May, 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 its quotas to Canadian dairy processors who have little incentive to import, does not provide fair or equitable procedures for administering the quotas, and does not give retailers any access to them. These measures deny the ability of U.S. dairy farmers, workers, and exporters to use the TRQs and fully benefit from USMCA.

While the United States tried to resolve the matter through consultations with Canada before initiating the Dispute Settlement Panel, Canada refused to change its policies. NMPF and USDEC engaged USTR and Congress, achieving broad bipartisan support from more than 125 members of the House and Senate for bringing this matter 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.