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USMCA panel rules in favor of U.S. over Canadian dairy import practices

The U.S. dairy industry is celebrating a victory in the first USMCA trade agreement dispute settlement process.  U.S. Trade Representative Katherine Tai announced the United States prevailed against Canada, with the review panel agreeing that Canada is breaching its trade agreement requirements by reserving most of the in-quota amount of dairy tariff-rate quotas for Canadian processors.

A tariff-rate quota applies a preferential rate of duty to an “in-quota” quantity of imports and a different rate to imports above that in-quota quantity.  The USTR’s office says Canada published notices to importers that in June and October 2020 and May 2021 for dairy TRQs, Canada set aside and reserved a percentage of the quota for processors and for so-called “further processors”, contrary to Canada’s USMCA commitments.  As a result of this restriction, the USTR says Canada has been undermining the value of its dairy TRQs for U.S. farmers and exporters since the entry into force of the USMCA by limiting access to in-quota quantities negotiated under the Agreement.  

Shawna Morris is the U.S. Dairy Export Council’s Vice President of Trade Policy. 

“Canada was given the lion’s share of all of the dairy importing rights, these dairy tariff rate importing quota access to its processors rather than them more available to other groups throughout the supply chain.”

And Mykel Wedig is with Edge Dairy Farmers Cooperative tells Brownfield what Canada was doing kept U.S. products out of Canadian consumer’s hands. “That means our products aren’t going directly into grocery stores and things of that nature, they were going into further processing so we were not getting the benefits we expected to see under the new USMCA.”

Canada received the confidential ruling on December 20th of last year and Morris says they have 45 days to comply, or Friday, February 3^rd of 2022, or the U.S. can consider actions including retaliatory tariffs on Canadian products.

After this story was initially posted, USDA Secretary Tom Vilsack issued a written statement about the ruling. He says, “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. “In order for trade deals to be effective and have the trust of the American people, they must be enforced. 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.”