US requests new USMCA dispute consultations on Canadian dairy TRQ policies

Dispute expanded to address Canada’s failure to meet obligations
calendar icon 30 December 2022
clock icon 3 minute read

United States Trade Representative Katherine Tai today announced last week that the United States is requesting new dispute settlement consultations with Canada under the United States-Mexico-Canada Agreement (USMCA) regarding Canada’s dairy tariff-rate quota (TRQ) allocation measures. Since initiating consultations with Canada in May 2022, the United States has identified additional aspects of Canada’s measures that appear to be inconsistent with Canada’s obligations under the USMCA, and US concerns have only increased.

With this new request, the United States expands its challenge of Canada’s dairy TRQ allocation measures to include Canada’s use of a market-share approach for determining TRQ allocations. Canada applies different criteria for calculating the market share of different segments of applicants, and Canada is failing to allow importers the opportunity to fully utilize TRQ quantities. The United States continues to challenge Canada’s dairy TRQ allocation measures that impose new conditions on the allocation and use of the TRQs, and that prohibit eligible applicants, including retailers, food service operators, and other types of importers, from accessing TRQ allocations. Through these measures, Canada undermines the market access that it agreed to provide in the USMCA.

“We remain very concerned by Canada’s refusal to honour USMCA commitments,” Tai said. “Rather than work toward meeting its obligations, Canada persists in implementing new dairy policies that are inconsistent with the USMCA, and which continue to deny US workers, farmers, producers, and exporters the full benefits of market access they were initially promised. We remain steadfast in our commitment to use all tools available to enforce our trade agreements and ensure that our dairy industry can offer a wide range of high-quality American products to Canadian customers.”

“Canada remains in violation of its commitments under the USMCA by not removing its trade restrictions on American dairy producers,” Secretary of Agriculture Tom Vilsack said. “Obtaining access to the Canadian market for US producers and exporters is an important priority for this Administration and the US Department of Agriculture (USDA) and the office of the US Trade Representative will continue to work in lockstep and use every tool at our disposal to achieve market access.”

The United States has raised concerns under the USMCA previously about Canada’s dairy TRQ allocation measures. In January 2022, a USMCA dispute settlement panel found Canada’s dairy TRQ allocation measures to be inconsistent with Canada’s USMCA obligations. 

In response to the adverse findings of the panel, Canada introduced changes to its TRQ allocation measures, but these new policies are still inconsistent with Canada’s obligations under the USMCA. In May 2022, the United States requestedconsultations with Canada to address its updated dairy TRQ allocation measures. Since initiating those consultations, the United States has identified additional areas of deep concern, and this new request for consultations provides an avenue to formally address US concerns. If the United States and Canada are not able to resolve the matter through consultations, the United States may request the establishment of a panel under the USMCA.

USTR officials worked closely with staff from the USDA throughout the first dispute and since the initiation of consultations in May 2022. Both agencies will continue working together, in consultation with stakeholders, to obtain Canada’s full compliance with its USMCA dairy commitments.

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