A trade dispute-settlement panel has ruled against Canada in a spat with the U.S. over dairy products.
The arbiters found that Canada is breaching its commitments by setting aside the 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 new North American trade pact that also includes Mexico.
Canada now has until February 3rd to respond or adjust its rules to comply with the panel’s ruling.
Under the U.S.-Mexico-Canada Trade 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.
But Canada is allocating 85% to 100% of those imports to processors, limiting the ability of other groups such as retailers to buy U.S. products, the trade dispute panel ruled.
The U.S. exported $478 million U.S. of dairy products to Canada from January through October, according to industry data. Should Canada fail to change its policy, under the rules of the continental trade agreement, the U.S. could retaliate by imposing tariffs on Canadian products.
The U.S. had said in submissions to the dispute resolution panel that it wasn’t challenging Canada’s right to maintain a supply management system but rather the inflexible rules of the system’s current allocation to processors.
The U.S. dairy industry has long pushed for greater accountability from Canada, part of the impetus for former President Donald Trump insisting on including dairy policy in the new trade pact that replaced the previous North American Free Trade Agreement (NAFTA).
