U.S. throws down CUSMA challenge on Canada’s dairy import limits

Filing challenges Canadian tariff rate quota reserved for processors

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Five months and counting since the Canada-U.S.-Mexico Agreement came into force, the U.S. government has launched a CUSMA challenge of how Canada applies tariff exemptions on dairy imports.

U.S. Trade Representative (USTR) Robert Lighthizer said Wednesday he has served Canadian Trade Minister Mary Ng with written notice that the U.S. is “exercising its rights to enforce” the CUSMA free trade pact, and is seeking consultations on the matter.

At issue, he said, is Canada’s allocation of dairy tariff-rate quotas (TRQs) — the amounts below which U.S. dairy products may enter the Canadian market at a lower rate of duty.

“By setting aside and reserving a percentage of each dairy TRQ exclusively for processors, Canada has 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,” Lighthizer’s office said in a release.

“Canada’s measures violate its commitments and harm U.S. dairy farmers and producers,” he said in the same release. “We are disappointed that Canada’s policies have made this first-ever enforcement action under (CUSMA) necessary to ensure compliance with the agreement.”

If the U.S. and Canada can’t resolve the stated concerns through consultations, the USTR’s office said it may request that a CUSMA dispute settlement panel be set up to examine the matter.

CUSMA grants Canada the right to maintain 14 TRQs on dairy products such as milk, cream, ice cream, skim milk powder, cheeses, condensed milk, yogurt and buttermilk, among others, the USTR said.

However, the USTR said, in notices to importers published in June and October, Canada sets aside and reserves a percentage of all its TRQs for processors. For 10 of the 14 TRQs, “an additional percentage is reserved for so-called ‘further processors.'” Also, on 13 of the TRQs, 10-15 per cent is “additionally reserved for distributors.”

Thus, the USTR said, “for all of Canada’s dairy TRQs, 100 per cent of the TRQ has been allocated among processors, ‘further processors,’ and distributors.”

Those allocations limit U.S. producers’ and exporters’ access to in-quota quantities negotiated under CUSMA, and also “introduce a new or additional condition, limit, or eligibility requirement on the utilization of a TRQ,” contrary to CUSMA provisions, the USTR alleges.

CUSMA entered into force on July 1 this year after the three member nations signed the pact in late 2018. It replaced the 1994 North American Free Trade Agreement (NAFTA) — a deal U.S. President Donald Trump, before he took office in 2016, pledged to renegotiate.

The new pact, Canada’s government said at the time, is meant to “preserve key elements of the long-lasting trading relationship and incorporate new and updated provisions that seek to address 21st-century trade issues.”

“The TRQ allocations by the federal government are consistent with the terms of the agreement,” Dairy Farmers of Canada CEO Jacques Lefebvre said via email Wednesday afternoon.

“Anyone who reads the text of CUSMA would see this, but the outgoing administration may feel that, by taking this approach, it will endear itself with family-owned dairy farms in the U.S.,” he added.

“Like all aspects of the Canada-U.S. trade relationship, Canada takes its obligations very seriously,” a spokesperson for Ng’s office said separately via email Wednesday.

“Canada’s administration of its dairy TRQs is in full compliance with its commitments under the new NAFTA.” — Glacier FarmMedia Network

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Editor, Daily News

Dave Bedard

Editor, Daily News, Glacier FarmMedia Network. A Saskatchewan transplant in Winnipeg.

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