Canada accused of dairy trade violations
New Zealand is initiating a formal trade dispute against Canada, accusing the Trudeau government of breaking its promises on dairy imports under the Trans-pacific Partnership (TPP) agreement.
The move is part of a growing international backlash against what is seen as Canada's limp embrace of its dairy obligations under recent trade agreements in North America, Europe and Asia-pacific.
Trading partners have been historically critical of the Canadian supply management system, which uses production controls and tariffs to protect domestic dairy farmers. As a concession to those trading partners, Canada has agreed to let some imported butter and cheese slip past the tariff barrier. That tariff-free dairy is known as the tariff-rate quota, or TRQ.
Major global dairy exporters, including New Zealand and the United States, welcomed the concession. But soon they were complaining that Canada had found a loophole by handing out the majority of the TRQS to Canadian dairy processors. By doing so, trading partners argued, Canada makes sure only low-value milk and cheese are brought in and manufactured into higher-value retail products — if the processors opt to use the quota at all.
New Zealand said many of its TRQS with Canada are unfilled, representing roughly $55 million in lost market access over the first two years of the deal.
“Canadian domestic processors sit on unused quota allocation because as competitors they have no interest in giving Canadian consumers or customers the option of accessing high quality, specialized, and more affordable dairy products from New Zealand,” Malcolm Bailey, chairman of the Dairy Companies Association of New Zealand, said in a statement.
Canadian Trade Minister Mary Ng 's office pushed back, saying the government takes its commitments under the TPP seriously. “Canada is a fair trading partner,” spokesperson Alice Hansen said in an email.
New Zealand lodged a formal request for consultations with Canada on Thursday, Bloomberg reported. The request marks the first phase in the dispute resolution process laid out in the TPP. It's also the first time New Zealand has ever launched a trade dispute under a free-trade agreement, New Zealand said.