USTR Asks for Consultations Over Canadian Dairy Barriers

U.S. Trade Representative Robert Lighthizer Dec. 9 announced that he'll be seeking consultations with Mary Ng, his Canadian counterpart, over the way that Canada allocated tariff rate quotas. Canadian processors are guaranteed a percentage of those import quotas, and the U.S. says that undermines American producers' access to Canada. “President [Donald] Trump successfully renegotiated the USMCA to replace the failed NAFTA, and a key improvement was to give U.S. dairy producers fairer access to Canada’s highly protected dairy market,” he said. “We are disappointed that Canada’s policies have made this first ever enforcement action under the USMCA necessary to ensure compliance with the agreement.”

The action drew praise on both sides of the aisle in the House, and from the Senate Finance Committee chairman. Rep. Kevin Brady, R-Texas, the top Republican on the House Ways and Means Committee, noted that USMCA improved on NAFTA's dispute settlement system, so that if the matter can't be resolved by consultations, the decision of an arbitration panel will be binding.

He said the USTR “is right to use our powerful new dispute settlement system in USMCA to challenge Canada’s discrimination against American dairy products. I look forward to continuing to consult with the Administration and American stakeholders as we stand up for the rights of American producers and workers in those cases where Canada and Mexico fall short of their obligations, such as on energy, biotech, trade facilitation, regulatory issues, and digital trade.”

Rep. Ron Kind, D-Wis., had called for this action back in August, and called it “a good day for Wisconsin's dairy farmers.”

Ways and Means Chairman Richard Neal, D-Mass., said, “Canada’s discriminatory actions in the dairy sector, including its inequitable administration of tariff-rate quotas for cheese, ice cream, milk, yogurt, and other dairy products and its Class 6 and Class 7 milk pricing schemes have harmed U.S. dairy producers and dairy food makers for years,” and he welcomed the opening of consultations.

Senate Finance Committee Chairman Chuck Grassley, R-Iowa, and Sen. Mike Crapo, R-Idaho, called this the right step. “One of the biggest improvements in the new USMCA are the provisions providing access to Canada’s dairy market, which had unfairly restricted equitable access to American dairy for years. We hope our Canadian partners can resolve this issue without going to arbitration, but we are supportive of Ambassador Lighthizer’s efforts either way,” they said in a statement issued after the announcement. Crapo is expected to be the next Finance Committee chairman.

The International Dairy Foods Association has also been raising concerns about the TRQ regime in Canada since the summer. CEO Michael Dykes said the USMCA text prohibits any conditions on TRQs outside the text. “One egregious example, in IDFA’s view, is limiting access to the 'Cheese of All Types' TRQ to just 15% for distributors and allocating 85% to processors, where there is no such restriction in USMCA and, in fact, the agreement requires parties to ensure that they do not 'limit access to an allocation to processors.'”