WASHINGTON, December 20, 2022—The International Dairy Foods Association (IDFA) reacted positively to the announcement by the Office of the U.S Trade Representative that the Biden Administration will seek a third round of consultations with Canada over its dairy tariff rate quota (TRQ) administration under the United States-Mexico-Canada Agreement (USMCA). The announcement follows consultations that were announced in May 2022 and held over the summer after Canada had implemented new TRQ policies in April. This third set of consultations adds new legal claims against Canada’s TRQ administration that are consistent with IDFA’s priority concerns with Canada’s failure to comply with its USMCA TRQ commitments.
“IDFA members and staff are grateful to our U.S. government colleagues for their perseverance in addressing Canada’s failure to abide by USMCA,” said Michael Dykes, president and CEO of IDFA. “We strongly support USTR’s announcement today and look forward to continuing to support the U.S. government’s efforts to ensure U.S. dairy exports reach the potential promised by USMCA.”
Earlier this year, Canadian TRQ policies withheld TRQ allocations to dairy importers due to the Canadian government’s concerns with U.S. electric vehicle tax credit legislation. Although Canada has since rescinded the policy, many other Canadian TRQ policies concerning to IDFA members remain in place, including Canada’s policies to manipulate quota allocations in order to favor Canadian processors, prohibit retailers and foodservice operators from receiving quota, and require constant import activity in a manner that prevents new importers from being eligible to obtain quota.
“Under the terms of USMCA, consultations are generally considered to be a pre-dispute step in hopes that parties can reach agreement on the concerns raised,” said Dykes. “Based on Canada’s history of continually rejecting U.S. concerns, however, IDFA anticipates these consultations will result in a dispute settlement panel being formed.”
In 2019—just before USMCA’s entry into force—the U.S. International Trade Commission (ITC) estimated that U.S. dairy exports to Canada would grow by $227 million due to USMCA’s terms. Although dairy exports have increased since the pact took effect, those increases have fallen well short of the ITC estimate.
The U.S. dairy industry exports approximately 17% of all milk production. As U.S. milk production continues to increase over the next decade while other dairy-producing competitors see decreasing production, the U.S. government must ensure there are functioning, efficient avenues for U.S. dairy exports to meet growing global demand in North America and around the world. IDFA supports the Biden Administration’s efforts to bring Canada into compliance with their USMCA TRQ commitments.