U.S. Seeks Second Dispute Settlement Panel on Canadian Dairy Quotas Under USMCA, By Reuters

OTTAWA (Reuters) – The Biden administration has requested the establishment of a second dispute settlement panel under the U.S.-Mexico-Canada Agreement (USMCA) to address a trade conflict with Canada regarding dairy import quotas, as announced on Wednesday.

The United States claims that Canada’s allocation of dairy tariff-rate quotas prevents eligible U.S. applicants, including retailers, from accessing Canadian markets, which undermines the market access commitments made in the USMCA that took effect in 2020, according to a statement from U.S. Trade Representative Katherine Tai’s office.

U.S. farmers have reported that Canada’s supply management system favors Canadian processors and negatively affects their ability to export to Canada. Last year, Washington requested the formation of the first dispute panel on dairy quotas after unsuccessful bilateral negotiations with Ottawa.

The initial panel produced a 50-page report indicating that Canada had violated the trade agreement with the U.S. and Mexico by reserving most of its preferential dairy tariff-rate quotas for Canadian processors.

In response, Canada has amended its dairy quota allocation policies. Trade Minister Mary Ng stated that Canada has fulfilled its obligations under the USMCA to ensure compliance with its quota system.

“Canada will actively participate in the CUSMA consultation process and stand by our position to manage our TRQs in a manner that supports our dairy supply management system,” Ng remarked, using another acronym for the USMCA.

Tai stated that the United States had conveyed to Canada that its new policies are inconsistent with the USMCA, which “prevents U.S. workers, producers, farmers, and exporters from fully benefiting from the market access that Canada committed to under the agreement.”

The International Dairy Foods Association (IDFA), a U.S.-based trade group, praised the Biden administration’s “aggressive” approach.

“The U.S. dairy industry has consistently demanded real TRQ reform that will allow for the market access Canada agreed to,” said Michael Dykes, CEO of IDFA.