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USTR challenges Canada’s allocation of dairy tariff-rate quotas

The Hagstrom Report

Trade Representative Robert Lighthizer announced that the United States is exercising its rights under the United States-Mexico-Canada Agreement to address measures adopted by the government of Canada that it maintains “are contrary to the provisions of the agreement and harm U.S. dairy farmers.”

Specifically, the United States is challenging Canada’s allocation of dairy tariff-rate quotas (TRQs). “By setting aside and reserving a percentage of each dairy TRQ exclusively for processors, Canada has undermined the ability of American dairy farmers and producers to utilize the agreed-upon TRQs and sell a wide range of dairy products to Canadian consumers,” USTR said in a news release.

Lighthizer provided official notice to Canada that it was exercising its rights to enforce the USMCA in a letter to Canada’s Minister of Small Business, Export Promotion and International Trade Mary Ng. If the United States and Canada are not able to resolve the United States’ concerns through consultations, the United States may request the establishment of a USMCA dispute settlement panel to examine the matter, USTR said.



“President 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,” said Lighthizer. “Canada’s measures violate its commitments and harm U.S dairy farmers and producers. We are disappointed that Canada’s policies have made this first-ever enforcement action under the USMCA necessary to ensure compliance with the agreement. This action demonstrates that the United States will not hesitate to use all tools available to guarantee American workers, farmers, ranchers, and businesses enjoy the benefits we bargained for.”

House Ways and Means Committee Chairman Richard Neal, D-Mass., said, “I applaud USTR’s decision today to initiate consultations with Canada under the USMCA regarding Canada’s unfair dairy trade practices. 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. I encourage the Canadians to adhere to their obligations under the USMCA to provide U.S. dairy farmers and dairy exporters greater access to Canada’s market.



“Similarly, I look forward to USTR enforcement actions that will effectively support Mexico’s labor reform and address longstanding and persistent labor violations in Mexico. Without robust enforcement, the corrupt practices by state or local authorities, as well as employers and their protection unions, in Mexico will continue to undermine workplace democracy and the USMCA more broadly.”

Senate Finance Committee Chairman Chuck Grassley, R-Iowa, and Senate Banking Committee Chairman Mike Crapo, R-Idaho, said in a joint statement, “The Trump administration is taking the right step for American dairy producers and farmers. 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.”

Senate Finance Committee ranking member Ron Wyden, D-Ore., praised USTR’s action, saying, “As I have said before, agreements, like the USMCA, are only worth the paper they are written on when our trading partners are held to their commitments. Trade agreement obligations without enforcement are meaningless and do not provide the protections and market access U.S. farmers expect. For these reasons, I commend USTR for taking the first steps toward ensuring that Canada lives up to the dairy market access commitments made in the USMCA. I look forward to this ensuring that our neighbors to the north have access to award-winning Oregon dairy products.”

International Dairy Foods Association President and CEO Michael Dykes said, “This step by USTR shows they are dedicated to ensuring all parties to USMCA honor their commitments and obligations.”

Dykes noted that USMCA text prohibits the introduction of any new conditions or eligibility requirements on the utilization of a TRQ beyond those set forth in the text, but said Canada’s “TRQs for many dairy products impose eligibility and allocation calculation conditions that clearly fall outside of Canada’s commitments. 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.’ There are many other Canadian conditions on allocation and eligibility that also are inconsistent with USCMA and negatively impact the ability of U.S. dairy to take advantage of the benefits offered by the agreement.”