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USTR Launches First-Ever USMCA Enforcement Action Against Canada’s Dairy Quotas

Posted December 10, 2020

Responding to complaints by the U.S. Dairy Export Council, the National Milk Producers Federation and lawmakers from milk-producing states, the United States Trade Representative yesterday made an official request for “consultations” — the initial step in the US-Mexico-Canada Agreement’s dispute settlement process — over Canada’s allocation of dairy tariff-rate quotas, which the USTR says are “contrary to the provisions of the agreement.”  
Hands at Negotiating Table w/ Background of Milk, Cows...

The U.S. argues that by setting aside and reserving a percentage of each dairy TRQ exclusively for processors, Canada has effectively “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.” An example of this would be limiting access to the “Cheese of All Types” TRQ to just 15% for distributors while allocating 85% to processors. 

In a statement, USTR Robert Lighthizer said that “Canada’s measures violate its commitments and harm U.S dairy farmers and producers,” adding that he was “disappointed” the enforcement action was necessary to ensure compliance with the USMA.


Canadian Reaction

A spokesperson for International Trade Minister Mary Ng said that “like all aspects of the Canada-U.S. trade relationship, Canada takes its obligations very seriously,” insisting that “Canada’s administration of its dairy TRQs is in full compliance with its commitments under the new NAFTA.”


Next Steps

Canada will have 15 days to respond with respect to any perishable items cited in the dispute, and 30 days for non-perishables, like powdered milk.

Should the consultation process fail to produce a resolution, the next step would be to establish a dispute resolution panel — a mechanism, ironically, that U.S. negotiators fought to eliminate when renegotiating the North American Free Trade Agreement.


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