US Successful in Dairy Lawsuit with Canada
By: Sydney Sheffield
The first dispute has been settled regarding the United States-Mexico-Canada Agreement (USMCA). A USMA panel agreed with the United States that Canada is infringing on its USMCA commitments by reserving most of the in-quota quantity in its dairy tariff-rate quotas for the use of Canadian processors exclusively. The decision is not only a win for the U.S. but also for U.S. dairy farmers.
“This ruling is a big step for the U.S. dairy sector towards realizing the full benefits of the USMCA and securing real access to the Canadian market for additional high-quality American dairy products such as milk, cheese and skim milk powder,” said the U.S. Department of Agriculture (USDA) Secretary Tom Vilsack. “Today’s action reflects the Biden-Harris Administration’s deep commitment to enforcing the USMCA and to ensuring that trade rules work for American farmers, ranchers, and producers. It also signals to our trading partners that the United States will stand firm against unjustified trade restrictions and continue fighting on behalf of our farmers and workers to ensure that we have full and fair access to foreign markets.”
A tariff-rate quota (TRQ) applies a preferential rate of duty to an “in-quota” quantity of imports and a different rate to imports above that in-quota quantity. Under the USMCA, Canada has the right to maintain 14 dairy TRQs. To administer its dairy TRQ volumes, Canada uses an import licensing system. A product that is subject to a TRQ can be imported only by someone who has a valid import permit. Canada then uses import quantities in its dairy supply management system and allocated a certain percentage for exclusively Canadian producers. The U.S. detailed that Canada has maintained dairy TRQ measures that run counter to its market access obligations under USMCA. In May 2021, the U.S. requested that a panel be assembled to investigate Canada’s actions since USMCA took effect.
The panel’s decision was supported by many in the industry. The International Dairy Foods Association (IDFA) President and CEO Michael Dykes, stated, “IDFA applauds the U.S. government’s commitment to ensuring Canada’s dairy trade obligations are upheld. DFA is pleased to join our global dairy industry partners today in welcoming the USMCA panel’s findings and promoting Canadian dairy policy accountability.”
Jim Mulhern, President, and CEO of the National Milk Producers Federation (NMPF) said, “Today’s decision is an important victory for U.S. dairy farmers and the millions of Americans whose jobs are tied to the U.S. dairy industry. America’s dairy farmers appreciate the Biden Administration’s dedication to preserving dairy export opportunities and the many members of Congress that have also stressed the importance of aggressive enforcement of dairy access rights in our trade agreements.”
From the panel’s decision, Canada now has 45 days to comply with the ruling.