The U.S. is putting together a second dispute settlement panel under the United States – Mexico – Canada Agreement. The panel will challenge Canada’s tariff-rate quotas and failure to follow the USMCA. These quotas allow Canada to impose higher tariffs on imports over a certain quantity, and the U.S. argues it unfairly blocks key export opportunities for farmers and processors.
United States Trade Representative Katherine Tai says even though the U.S. won a previous dispute over this problem, the Canadian government has not fixed the problem.
“With this panel request, we are utilizing our available tools to enforce our trade agreements and ensure that U.S. workers, farmers, processors, and exporters receive the full benefits of the USMCA,” Tai says.
The United States has raised concerns under the USMCA previously about Canada’s dairy TRQ allocation measures. In December 2021, a USMCA dispute settlement panel found Canada’s dairy TRQ allocation measures to be inconsistent with Canada’s USMCA obligations. In response to the adverse findings of the panel, Canada introduced changes to its TRQ allocation measures, but these new policies are still inconsistent with Canada’s obligations under the USMCA.
In May 2022, the United States requested consultations with Canada to address its updated dairy TRQ allocation measures. In December 2022, the United States again requested consultations with Canada after identifying additional areas of deep concern with Canada’s dairy TRQ polices. The parties held consultations on Jan. 17, but were not able to resolve the matter.
This is the second panel request that the Biden administration has filed under Chapter 31 (Dispute Settlement) of the USMCA. Under the timeline provided in the USMCA, the panel is expected to issue a report later this year.
“Our dairy farmers and cheesemakers rely on fair trade practices to grow their businesses and remain competitive on an international stage,” says U.S. Sen. Tammy Baldwin. “I look forward to resolving this dispute with Canada as soon as possible to restore stability and fairness in the marketplace for Wisconsin’s dairy producers.”
Several dairy groups have chimed in their support for this next dispute settlement panel.
“Canada’s TRQ allocation system is not only a violation of USMCA — it directly harms American dairy farmers, processors, and other workers by unfairly restricting access to their market,” says National Milk Producers Federation President and CEO Jim Mulhern. “USTR’s action is an important step in righting this wrong and sending a message that the U.S. will fight violations of trade deals in Canada and wherever else they may be committed.”
Krysta Harden, president and CEO of the U.S. Dairy Export Council, says as long as Canada drags its feet, USDEC will continue to work with USTR and USDA to fight back and propose retaliatory action if needed.
“Additional market access into Canada is an important part of USMCA,” says Wisconsin dairy farmer Brody Stapel, who is president of Edge Dairy Farmer Cooperative. “International trade is key to economic growth and stability for dairy farmers and processors. Edge and our farmers appreciate USTR’s commitment to holding Canada to the agreement and giving the U.S. dairy community greater export opportunities as intended.”
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