U.S. wins Canadian dairy trade spat as panel says rules defy NAFTA

The U.S. notched a victory in a spat with Canada over dairy trade, with a dispute-settlement panel finding that the nation’s allocation of American lower-tariff imports violates their agreement.

The U.S. notched a victory in a spat with Canada over dairy trade, with a dispute-settlement panel finding that the nation’s allocation of American lower-tariff imports violates their agreement.

The arbiters found that Canada is breaching its commitments by setting aside the vast majority of lower-duty imports for the exclusive use of Canadian processors, with only a small minority reserved for other businesses along the dairy supply chain, such as distributors. The case is the first-ever ruling by a dispute-settlement panel under the trade pact that also includes Mexico.

The panel decision was delivered to the parties as a final report on Dec. 20, the U.S. Trade Representative said in a statement. Canada now has until Feb. 3 -- 45 days from when that final report was issued -- to respond or adjust its rules comply with the panel’s ruling, the USTR said.

Under the U.S.-Mexico-Canada Agreement that took effect in July 2020, Canada conceded to granting more duty-free or lower tariff access across dairy products including milk, cream, cheese, yogurt and ice cream via a tariff-rate quota, or TRQ.

But Canada is allocating 85 per cent to 100 per cent of those imports to processors, limiting the ability of other groups like retailers to buy U.S. product, said Jim Mulhern, president and chief executive officer of the U.S. National Milk Producers Federation, an industry group.

“The United States and Canada negotiated specific market-access terms covering a wide variety of dairy products, but instead of playing by those mutually agreed upon rules, Canada ignored its commitments,” Mulhern said. “As a result, U.S. dairy farmers and exporters have been unable to make full use of USMCA’s benefits.”