WASHINGTON, May 25, 2022—The International Dairy Foods Association today applauded the U.S. Government’s announcement that it would once again initiate consultations, the first step in a formal dispute settlement case, over Canada’s continued manipulation of dairy tariff rate quotas (TRQs) in violation of Canada’s commitments under the United States-Mexico-Canada Agreement (USMCA).
The Office of the U.S. Trade Representative (USTR) initiated a similar dispute settlement case exactly one year ago. In December, a USMCA dispute panel found Canada to be non-compliant with their dairy TRQ commitments under USMCA. However, Canada was unwilling to reform their trade-distorting practices on dairy and continued to ignore the dispute panel. IDFA and the U.S. dairy industry have consistently rejected Canada’s manipulation and continue to urge the U.S. Government to hold Canada accountable for trade-distorting practices that go against both the intent and the letter of the USCMA agreement.
“On behalf of U.S. dairy, IDFA applauds the aggressive action taken today by USTR to hold Canada accountable for trade commitments made under USMCA and refusing to administer their dairy TRQs in a manner compliant with the agreement,” said Michael Dykes, D.V.M., president and CEO of IDFA. “However, the U.S. Government cannot allow Canada to continue to deny U.S. exporters the access it promised under the agreement. USTR, the White House, and USDA must remain vigilant and continue to expose Canada’s non-transparent, market-distorting practices at every turn when it deviates from USCMA commitments. The U.S. dairy industry has made clear from the start that U.S. dairy exporters demand real TRQ reform that will permit the market access Canada agreed to. Our government officials must stay the course.”
Going back to the initial dispute settlement finding in December, the panel found that across more than a dozen categories of dairy products, 85 to 100 percent of the lower tariff quota were reserved for Canadian processors, putting Canada in breach of its USMCA commitments. After initial praise from the U.S. dairy industry, the finding proved not to be a strong one when in May, Canada announced policies that continue to reserve most quotas for Canadian processors and deny access to retailers. The Government of Canada has also used specious claims about nonexistent electric vehicle tax credits and other proposed U.S. policies not passed into law as a basis for market manipulating practices. IDFA rejects these claims.
“IDFA has appreciated the open lines of communication between USTR and USDA officials and the U.S. dairy industry throughout this ordeal, and we will remain a committed partner in resolving this dispute,” said Dykes.
Since the inception of USMCA in July 2020, IDFA has called on USTR to hold Canada accountable for full implementation of the Agreement. Following the dispute panel’s finding, Canada released a proposal in March 2022 that made minimal changes and continued to fall well short of Canada’s USMCA commitments. IDFA has continued to call for the following policy options: allow retailers to serve as importers; remove market-based allocation policies that focus on processors; and encourage new TRQ entrants, among others. But when Canada’s March proposal so clearly ignored Canada’s trade obligations, IDFA called on USTR to consider a wide range of retaliatory responses that show Canada and the world that the United States places a high value on the enforcement of Free Trade Agreements. To that end, IDFA has advocated for TRQ reform, the initiation of retaliatory tariffs, and has urged the U.S. government to evaluate disputing Canada’s subsidized milk protein exports under WTO rules.