Canada faces U.S. action for alleged dairy offence over imports: reports
The United States is threatening trade action against Canada after U.S. politicians and industry groups complained the country was not making good on its promise to loosen restrictions on dairy imports.
U.S. Trade Representative Robert Lighthizer is set to announce an enforcement action under the United States-mexico-canada Agreement (USMCA), according to reports this week from Politico and Bloomberg News that cited government sources.
In a statement to the Financial Post on Tuesday, the U.S. Dairy Export Council said it expects Lighthizer to file the complaint in response to Canada's “failure to abide” by its commitments under USMCA to allow more U.S. dairy imports into Canada's heavily regulated dairy market.
Under the new USMCA, Canada agreed to expand its tariff-rate quotas, which are essentially the amount of dairy imports that can come into the country without prohibitive tariffs.
For example, the agreement will allow an extra 50,000 metric tonnes of fluid milk, and 12,500 metric tonnes of cheese, to enter Canada from the U.S. by the sixth year of the agreement.
The U.S. move represents the first enforcement action under the new trade deal.
That concession was viewed as significant progress for the U.S. dairy industry, which had long been critical of Canada's supply management system and its heavy tariffs on foreign dairy products.
“Of course, U.S. dairy farmers had high hopes,” said Nicolas Lamp, a former dispute settlement lawyer at the World Trade Organization who now teaches trade law at Queen's University in Kingston, Ont.
The excitement ended abruptly, however, in June when the Canadian government announced exactly how it planned to roll out that extra market access for U.S. imports.
“The thing with a quota is you have to decide who gets the quota,” Lamp said.
Canada's decision to give much of the new quota to domestic dairy processors through import permits riled U.S. politicians and U.S. dairy industry groups. The concern for U.S. producers, Lamp said, is that Canadian processors are more likely to import lower value milk products and turn them into higher value, retail ready products, rather than just import the high-value products.
“The economic value of the quota for the U.S. depends on the decisions that Canadian importers are making,” Lamp said.
The U.S. Dairy Export Council described Canada's quota allocation plan as a show of “disregard for its USMCA dairy commitments.” Jaime Castaneda, the council's senior vice-president of trade policy, said in a statement.