U.S. Trade Representative Katherine Tai announced Tuesday that the U.S. is requesting a dispute panel to challenge Canada’s operation of dairy tariff-rate quotas that it agreed to under the U.S.-Mexico-Canada Agreement.
The U.S. dairy industry, which has complained that Canada prevents imports of higher-priced dairy products like cheese in order to protect domestic producers from foreign competition, has been requesting for months that USTR demand a dispute panel.
“Canada has failed to take the necessary action to comply with its obligations under USMCA by inappropriately restricting access to its market. This needs to stop and we are thankful that USTR intends to make that happen,” National Milk Producers Federation President and CEO Jim Mulhern said Tuesday.
The U.S. has requested a three-person panel to judge its claims, according to a senior USTR official. If the U.S. wins the case, Canada will have some time to make changes to how it runs the quotas. In the even that Canada did not comply, punitive tariffs are possible.
“Launching the first panel request under the agreement will ensure our dairy industry and its workers can seize new opportunities under the USMCA to market and sell U.S. products to Canadian consumers,” Tai said in a statement.
Canada is accused of setting aside portions of the quotas for processors that buy typically cheaper dairy ingredients, preventing Canadian retailers and restaurants from using the quotas to buy higher-value products. Canada agreed under USMCA to increase U.S. access to Canada’s market for milk, cheese, cream, skim milk powder, butter, ice cream and whey by establishing quotas. U.S. industry groups say Canada is giving 85% of the quotas to processors so they can buy U.S. products that don’t compete with Canadian products.
“This restriction undermines the value of Canada’s dairy TRQs for U.S. farmers and exporters by limiting their access to in-quota quantities negotiated under the USMCA,” the Office of the USTR said.
Krysta Harden, president and CEO of the U.S. Dairy Export Council said, “Our trading partners need to know that failure to meet their agricultural trade commitments with the United States will result in robust action to defend U.S. rights — today’s action demonstrates just that.”
USTR officials said the panel may hold a hearing that is open to the public if both countries agree, but it’s still unclear if that will happen.
Republicans and Democrats in both houses of Congress have been pressing the USTR for action on Canada.
“A core component of this agreement was USMCA’s promise of new export opportunities for America’s dairy industry and the introduction of fairer trade rules to ensure that American-made dairy exports can compete on a more level playing field and reliably access our neighboring trading partners,” House lawmakers said in a recent letter to Tai. “Unfortunately, those results have not yet been fully realized.”
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