Canada violated its trade agreement with the U.S. and Mexico by reserving a share of the dairy market exclusively for Canadian farmers, a trade dispute panel ruled late Tuesday in a decision that could boost sales for American dairy farmers.
In the first ruling ever by a dispute resolution panel created by the U.S.-Mexico-Canada Agreement (USMCA), Canada must open up more of its market to the U.S. That potentially could add more than $200 million in sales for U.S. dairy farmers.
Jim Mulhern, president of the National Milk Producers Federation, called the decision “an important victory for U.S. dairy farmers and the millions of Americans whose jobs are tied to the U.S. dairy industry.”
“The United States and Canada negotiated specific market access terms covering a wide variety of dairy products, but instead of playing by those mutually agreed upon rules, Canada ignored its commitments,” Mr. Mulhern said in a statement.
Under USMCA, Canada agreed to grant the U.S. and Mexico more duty-free or lower tariff access to dairy products, including milk, cream cheese, yogurt and ice cream, in a tariff-rate quota.
But Canada allocated as much as 85% of those imports to dairy processors, limiting the ability of other groups, including retailers, to buy U.S. products.
The Trump administration filed an initial complaint against Canada’s dairy quotas in December 2020, sparking negotiations between the nations but no resolution.
In May 2021, the Biden administration sought a decision from the USMCA dispute resolution panel, which was created to resolve issues stemming from the trade agreement. Elbio Rosselli, a diplomat from Uruguay, chaired the three-member panel.
Canada did not say what it would do in response to the decision but acknowledged it has until Feb. 3 to resolve the issue.
In a joint statement, Canada’s ministers of trade and agriculture said they “continue to stand up for its dairy industry, farmers and workers and the communities they support.”
Canada is the second-largest dairy market for the U.S., behind Mexico, so the ruling could be lucrative for U.S. dairy farmers. The dispute resolution panel’s decision could boost U.S. dairy exports to Canada by $227 million.
Officials on the right and left applauded the decision as a victory for the U.S.
“This historic win will help eliminate unjustified trade restrictions on American dairy products, and will ensure that the U.S. dairy industry and its workers get the full benefit of the USMCA to market and sell U.S. products to Canadian consumers,” U.S. Trade Representative Katherine Tai said.
Rep. Kevin Brady of Texas, the top Republican on the House Ways and Means Committee, also hailed the decision.
“I commend USTR for using USMCA’s new enforcement mechanism to achieve this important result,” Mr. Brady said. “Canada must now do the right thing and come into full compliance with its obligations on dairy.”
• Jeff Mordock can be reached at jmordock@washingtontimes.com.
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