The United States won its case in its challenge to the tariff quotas applied by Canada on certain dairy products, which did not prevent the Minister of Agriculture, Marie-Claude Bibeau, from saying that she was “very satisfied” of the Canada – United States – Mexico Agreement (AECUM) panel ruling released Tuesday.
“This is a judgment which proves Canada wrong, but which does not call into question the principle of supply management in the dairy sector”, summarizes Richard Ouellet, specialist in international trade and professor at Laval University.
This is the first decision rendered by the CUSMA dispute settlement mechanism, which entered into force in July 2020. The United States had complained that Canada is reserving the bulk of imported dairy products. processors, which limits their access to the Canadian market.
The panel that examined the complaint concluded that Canada’s administration of tariff quotas is inconsistent with the provisions of the free trade agreement. He asks Canada to change the allocation of tariff quotas, which should be done within a month.
“We have taken note of the panel’s finding with respect to Canada’s practice of maintaining reserves of dairy tariff rate quotas for the benefit of dairy processors,” said Minister Bibeau and Minister of International Trade, Mary Ng. , in a joint press release.
Above all, they insisted on the fact that the decision does not call into question the supply management system and Canada’s ability to manage the allocation of tariff rate quotas for dairy products.
“Most importantly, it is important to note that the panel expressly recognizes the legitimacy of Canada’s supply management system,” they commented.
For Quebec milk producers, the decision on the allocation of quotas does not change anything in the short term, said Geneviève Rainville, general manager of their association. “The quantities that can be imported do not change,” she explained.
The fact that the CUSMA body recognizes the legitimacy of the Canadian supply management system “is reassuring for us”, she added.
Other challenges?
In the United States, the CUSMA panel ruling has been called historic by Trade Representative Katherine Tai.
“This historic victory will help remove unwarranted limits on US dairy products,” she said shortly after the decision was released, comments reported by The Canadian Press.
The dairy issue had been central to the renegotiation of the North American Free Trade Agreement (NAFTA), and Canada had to concede part of its market to secure the deal.
With CUSMA, Canadian milk producers have already had to give up market share, recalls Professor Richard Ouellet. “The loss is already there,” he said.
He said the panel ruling may be clear on the legitimacy of supply management, but that probably won’t stop the United States from once again attacking a system it doesn’t like.
The Biden administration, in my opinion, is even more protectionist than the previous one and is very interested in these issues.
Richard Ouellet
The ball is now in the federal court, which must change its rules for allocating tariff quotas. The parties must agree on a solution within 45 days of receiving the final report, i.e. no later than February 3, 2022.
The CUSMA panel ruling is welcomed by Canadian cheese importers, who see it as a benefit to consumers. The expected changes, “Ultimately, will reduce costs for Canadian consumers and increase choice on grocery shelves,” commented Patrick Pelliccione, President of the Canadian Council for International Cheeses.
The group, based in Ottawa, is not opposed to the supply management system, but demands that Canada’s tariff rate quotas for cheese be allocated to those who are most likely to use them, not just those who are most likely to use them. transformers.
Quebec produces 36% of Canadian dairy production and has nearly half of the country’s dairy farms.