Canadian Trade Barriers Highlighted in 2021 National Trade Estimate Report

Trade Update • APRIL 7, 2021

The Office of the U.S. Trade Representative last week released its annual National Trade Estimate Report on Foreign Barriers outlining the current status of foreign trade and investment barriers to U.S. exports worldwide.

The 570-page report examines 65 trading partners and country groups such as the United Kingdom (now included as a separate entity following Brexit) and the European Union.

Comprising trade barriers in almost a dozen areas, including import policies such as tariffs, import licensing, and customs barriers, the report “highlights significant barriers that present major policy challenges with implications for future U.S. growth opportunities, and the fairness of the global economy,” according to the USTR.

In a statement, Ambassador Katherine Tai said this year’s NTE Report “identifies a range of important challenges and priorities to guide the Biden Administration’s effort to craft trade policy that reflects America’s values and builds back better.”

Outstanding and Emerging Canadian Trade Barriers

In the seven pages dealing with various trade barriers posed by Canada, the report hews closely to recent versions, sometimes even repeating entire sections verbatim.

Among the import policies, technical barriers to trade, and sanitary or phytosanitary measures identified in the report as barriers to U.S. exports of goods and services are the following:

Agricultural Supply Management

As it has since the late 1980s when the issue was first raised by the Reagan administration, the NTE highlights Canada’s supply management regime, which it says “severely limits the ability of U.S. producers to increase exports to Canada… and inflates the prices Canadians pay for dairy and poultry products.”

While noting that the United States-Mexico-Canada Agreement has expanded market access opportunities for various supply-managed goods, the USTR states that it “remains concerned about potential Canadian actions that would further limit U.S. exports to the Canadian dairy market.”

Ministerial Exemptions

Canada’s prohibition on bulk imports of fresh fruits and vegetables in packages exceeding certain sizes (typically 50 kgs) unless granted a ministerial exemption is once again included in the report. No action is recommended, though it notes that a 2007 bilateral deal continues to provide U.S. potato growers with “predictable access” to these exemptions.

Technical & Sanitary or Phytosanitary Trade Barriers

Like previous reports dating back to 2008 when Canada’s new compositional standards for cheese entered into force, the 2021 NTE complains that certain limitations in the regulations have the effect of further restricting access of U.S. dry milk protein concentrate to the Canadian market.

Restrictions on U.S. seed exports are also once again addressed in the report, just as it has been for many years, over concerns that the variety registration system managed by the Canadian Food Inspection Agency is “slow, cumbersome and disadvantages U.S. seed and grain exports to Canada.” Citing a USMCA commitment to discuss issues related to seed regulatory systems, the USTR says it “will continue to discuss with Canada steps to modernize and streamline Canada’s variety registration system.”

Emerging Concerns

Two areas of emerging concern noted by the USTR in terms of potentially becoming barriers to trade in the future are proposed new requirements for the labeling of certain prepackaged foods and a new integrated management approach to plastic products being advanced by the Trudeau government.

In the works since 2016, the front-of-package labeling requirements on prepackaged foods deemed high in sodium, sugars, and saturated fat being considered by Health Canada have raised concerns among U.S. industry that it will negatively impact exports of processed foods to Canada and undermine free trade benefits of the USMCA. The report notes that the U.S. has submitted “comprehensive comments” and “has regularly consulted with Canada regarding its plans to produce an updated draft or final regulation.”

With regards to the Canadian government’s intent to ban certain single-use plastics (e.g., checkout bags, straws, stir sticks, six-pack rings, cutlery, and foodware made from hard-to-recycle plastics), the USTR says it has commented on the Order proposed last October to add “plastic manufactured items” to Schedule 1, that would give the Canadian government the regulatory authority to manage plastic production, importation, and use. As such, the U.S. has asked that the World Trade Organization be notified of any implementing measures to ensure they are aligned with international trade rules. The USTR says it “will continue to engage with Canada on these issues and will closely monitor their impact.”