USMCA panel upholds Canada's dairy market practices

Nov 28, 2023

In a significant ruling by a U.S-Mexico-Canada Agreement (USMCA) dispute panel, Canada’s strategy to manage its dairy market has been upheld, allowing it to maintain restrictions on U.S. dairy access. This decision, which aligns with Canada’s approach to dairy imports, underscores the complexities inherent in international trade agreements.

The background of this ruling dates to January 2022, when a panel determined that Canada had restricted market access for U.S. dairy products in a manner inconsistent with USMCA guidelines. In response, Canada revised its dairy tariff rate quota (TRQ) system, but the U.S. deemed these changes inadequate and initiated a second case. The recent panel ruling, however, found that Canada’s revisions were sufficient, negating the need for further alterations.

This decision reflects Canada's commitment to balancing international obligations with domestic industry considerations. The ruling has been met with mixed reactions. While some in the U.S. dairy sector, represented by the National Milk Producers Federation and the U.S. Dairy Export Council, view it as a setback, it also highlights Canada's efforts to navigate complex trade agreements while protecting its dairy sector.

Jim Mulhern, president and CEO of NMPF, expressed disappointment but also acknowledged the efforts of the President’s administration and Congress in pursuing this matter. Krysta Harden, president and CEO of USDEC, noted the ruling's potential impact on future trade dynamics.

The USMCA, implemented in 2020, established 14 different TRQs for dairy imports, aiming to create a balanced trade environment. Canada’s approach, which primarily allocates TRQ volumes to its processors, has been a point of contention but also reflects the country's strategy to support its domestic dairy industry. The minor adjustments made by Canada in 2022, while criticized by some U.S. stakeholders, are indicative of its efforts to comply with USMCA while prioritizing national interests.

This ruling is a reminder of the delicate balance that must be struck in international trade agreements, where diverse national interests and global commitments converge.

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