Dairy Becomes First USMCA Dispute Case

USTR Requests USMCA Dispute Settlement Over Canadian Dairy Measures

Jerry Hagstrom
By  Jerry Hagstrom , DTN Political Correspondent
Dairy exports to Canada were forecast to increase $242 million annually under the USMCA. The U.S. is now making dairy its first area for dispute negotiations with Canada over some of its quotas being set aside for domestic producers. (DTN file photo by Chris Clayton)

WASHINGTON (DTN) -- The first trade dispute panel request from the Biden administration under the United States-Mexico-Canada Agreement (USMCA) will come against Canada over dairy measures that undermine U.S. dairy exports to Canada.

The move reflects continued dispute about Canada's domestic dairy policies even after a deal was struck to allow higher U.S. exports of products such as milk, cream, skim milk, butter, cheeses and whey products.

U.S. Trade Representative Katherine Tai on Tuesday announced the U.S. has requested and established a dispute settlement panel under USMCA to review measures adopted by the government of Canada that undermine the ability of American dairy exporters to sell a wide range of products to Canadian consumers.

The U.S. is challenging Canadian dairy tariff-rate quotas (TRQs) in which Canada specifically set-aside a percentage of each dairy TRQ exclusively for Canadian processors. A TRQ is a set volume of product allowed to come into a country under the lowest, preferential tariff level negotiated. U.S. dairy groups see Canada's policy of giving TRQ percentages specifically to Canadian dairy processors as undercutting the volume of product Canada intends to allow into the country at lower tariff levels. At least twice in the past year, Canada has set aside a percentage of its TQR on 14 dairy products for its own domestic processors.

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"These measures deny the ability of U.S. dairy farmers, workers, and exporters to utilize the TRQs and realize the full benefit of the USMCA," Tai said.

A top priority for the Biden administration is fully enforcing the USMCA and ensuring it benefits American workers, Tai said. "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."

Just last week, a group of 67 dairy companies, the U.S. Dairy Export Council and the National Milk Producers Federation urged Tai to initiate a dispute settlement case against Canada's TRQ rules. Tai also brought up dairy policy when she attended online last week the inaugural USMCA commission meeting.

Dairy exports to Canada were meant to be a winner for U.S. agriculture under the USMCA. Overall, U.S. agricultural exports are expected to increase by about $2 billion annually. About 12% of the growth in sales, or about $242 million, was projected to come from increased dairy exports to Canada, according to a U.S. International Trade Commission analysis of USMCA in 2019.

Agriculture Secretary Tom Vilsack, who led the U.S. Dairy Export Council over the previous four years, said Tai's actions were needed to ensure Canada complies with its USMCA commitments.

"This is an important step for American agriculture, and one that brings the U.S. dairy sector closer to realizing the full benefits of the USMCA," Vilsack said. He added, "I am hopeful of a swift resolution that allows Canadian consumers access to high-quality U.S. dairy products and delivers the economic opportunities promised under USMCA to U.S. dairy farmers."

Office of the U.S. Trade Representative Announcement: https://ustr.gov/…

DTN Ag Policy Editor Chris Clayton contributed to this article.

Jerry Hagstrom can be reached at jhagstrom@nationaljournal.com

Follow him on Twitter @hagstromreport

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Jerry Hagstrom