Monday, January 24

Canadian milk: first dispute over the North American treaty and victory for the United States

The United States announced that it had won a victory over Canada, in the framework of the first litigation procedure of the North American Free Trade Agreement (USMCA or CUSMA), over Canadian milk quotas, one of the many areas of tension. between the two neighbors.

Washington launched a year ago, just a few months after the entry into force of this new trade treaty between the United States, Canada and Mexico, the first procedure to face a dispute.

In their sights, the milk quotas adopted by Canada. Washington criticizes Ottawa for reserving part of the milk of Canadian farmers for Canadian dairies, who process it, thus automatically reducing the quantity of milk sold to them by the United States.

A settlement panel was therefore established in May by the United States, as required by the procedure provided for by the treaty, and the latter issued its conclusions on December 20, which were published on Tuesday. Verdict: Canadian quotas are contrary to USMCA provisions.

US Trade Representative (USTR) Katherine Tai hailed a “historic victory.”

This “will help eliminate unwarranted trade restrictions on American dairy products, and allow the American dairy industry and its workers to fully benefit from CUSMA to market and sell American products to Canadian consumers,” she said. in a press release.

– Canada “takes note” –

The Canadian government for its part indicated to have “taken note” of this observation, and assures that it “will continue to work in close collaboration with the Canadian dairy industry”.

He also assured that he “takes seriously its commitments and obligations under international agreements, including those provided for in CUSMA with the United States, its closest trading partner”, according to a statement from the ministers. from International Trade, Mary Ng; and from Agriculture and Agri-Food, Marie-Claude Bibeau.

The two Canadian ministers, however, said they were “satisfied” with the report, believing that it “spoke largely in favor of Canada and its dairy industry”.

“Above all, it is important to stress that the panel expressly recognizes the legitimacy of Canada’s supply management system”, and confirms “that Canada can manage at its discretion its tariff rate quota allocation policies for dairy products in the CUSMA framework to support its supply management system. “

A solution must be found within 45 days of receipt of the report, by February 3, 2022. Without a deal, the dispute could result in additional tariffs on Canadian products, which a US official says , is not the objective of the United States, which wants to continue working with Canada.

– Litigation palette –

The conflict over milk is one of the many areas of contention between the two neighbors, which persist despite the arrival of Joe Biden to the White House, after a mandate marked by trade wars under Donald Trump.

The former president was also at the origin of the new free trade agreement between the three countries of North America, which replaced on July 1, 2020 the Aléna, the North American free trade agreement. which had been in force since 1994.

The three partners have always trumpeted that this new treaty would be beneficial for their economies and their workers, but the range of litigation has widened.

Thus, faced with the American offensive in the dairy sector, the Canadian government had targeted the solar panel sector, and requested the formation of a group of experts to denounce the application of American tariffs of 18% in this industry. .

And the dispute over Canadian softwood lumber, which has plagued relations between the two countries for more than 35 years, recently resurfaced when Washington doubled the countervailing duty rate. Ottawa has deemed these rights “unjustified” and announced that it will challenge them.

From January to October 2021, the United States exported $ 478 million worth of dairy products to Canada, which is the third-largest export destination for American dairy products, the USTR said.

Canada indicates for its part that its 10,095 dairy farms generate some 19,000 direct jobs.

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