Panel Rules Canada Must Drop Dairy Tariff Rate Quotas

Jan. 4, 2022
First resolution under United States-Mexico-Canada Agreement could mean $200 million in new dairy sales to Canada.

An inter-governmental dispute panel today (Jan. 4) ruled Canada has been using dairy product tariffs that violate the United States-Mexico-Canada Agreement (USMCA). The result could mean $200 million in additional foreign dairy sales to Canada.

In the first use of USMCA's dispute mechanism, the panel found Canada used a complex set of tariff rate quotas (TRQs) to protect a share of the dairy market for Canadian dairy processors in violation of the 2020 pact. Canada has until Feb. 3 to respond to the panel’s findings and make its TRQ regulations consistent with USMCA.

USMCA replaced the 1994 North American Free Trade Agreement.

Canada’s TRQ administration was found to discourage imports by setting a quota allocation to be used by Canadian processors only and restricting the ability of exporters to sell directly to distributors or retailers, among other practices, according to a statement by the (primarily American) International Dairy Foods Assn. (IDFA). The effect has been to limit and distort the market access Canada has granted partners under its agreements.

IDFA was joined in celebrating the decision by National Milk Producers Federation, U.S. Dairy Export Council, Dairy Companies Association of New Zealand (DCANZ), Europe's Eucolait and, interestingly, the International Cheese Council of Canada, which apparently is big into importing.

A Wall Street Journal story estimated the resulting changes could increase dairy products sales to Canada from all foreign sources by more than $200 million annually.

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