Lawyers and lobbyists appear to be the winners in a tussle between United States and Canadian dairy industries. By Anne Cote.

The United States, Canada and Mexico signed a new trade deal in 2020 after three years of tough negotiations. Part of the deal, known in Canada as CUSMA and in the US as USMCA, focused on Canada’s supply-managed dairy industry. US dairy producers and processors wanted Canada to drop the supply-managed system and allow full access to the Canadian market for US dairy products. Canadian dairy producers and processors dug in their heels and fought to keep the system.

The Canadian dairy industry won, sort of. In return for keeping their supply-managed system they agreed to allow the US to increase dairy exports to Canada but set out specific TRQs to be managed by the Canadian dairy industry and government trade personnel.

The elusive TRQ, an acronym that pops up over and over in dairy conversations on both sides of the border, is “tariff-ratio quota”. It allows a set amount of product to enter a country at a lower rate than the regular tariff.

It didn’t take long before the US launched several claims against Canada’s trade practices. The only complaint the US won was the one pertaining to the dairy TRQ allotment mechanism.

They said it hindered the flow of dairy products from the US to Canada by assigning a portion of the TRQ to Canadian processors. The CUSMA dispute resolution panel ruled Canada should revisit its method of allotting TRQs to processors and distributors. Canada complied and announced a new allocation mechanism on May 16, 2022. Mary Ng, Canada’s minister of international trade, export promotion, small business and economic development, said in reference to the result of recent US challenges to CUMSA, “The dispute settlement panel’s report ruled in favour of Canada in a majority of the claims. The new policies address the sole finding of a CUSMA dispute panel that Canada’s practice of reserving TRQ pools exclusively for the use of dairy processors is inconsistent with the agreement. The new policies end the use of processor-specific TRQ pools.”

According to a Dairy Farmers of Canada statement the same day, “The new allocation mechanism, which is based on market share, does not reserve any portion of the CUSMA TRQs specifically to Canadian dairy processors and is therefore fully compliant with the CUSMA dispute settlement panel decision.” (2022).

So, the U.S. won its argument on TRQs but they didn’t stop there. They launched a second complaint, again about the allocation and management of dairy TRQs.

The US Dairy Export Council (USDEC) and the National Milk Producers Federation (NMPF) continue to push for more access to the Canadian market and issued a joint statement on May 25, 2022. In it, Jim Mulhern, president and CEO of NMPF states, “Dairy farmers appreciate USTR’s (United States Trade Representative) continued dedication to aggressively pursuing the full market access expansion into the Canadian market that USMCA was intended to deliver.”

This type of back and forth rhetoric over trade deals is not new to US and Canada trade relationships. The greatest winners always seem to be the lawyers and lobbyists as years grind by with little or no progress on a myriad of claims presented to dispute panels.

Minister Ng supports Canada’s stand on dairy TRQs saying, “Canada has met its obligations under CUSMA to ensure that our TRQ system is compliant. We respect the right of the United States to initiate the dispute resolution mechanism as part of the agreement. Canada will actively participate in CUSMA’s consultation process and stand by our position to administer our TRQs in a manner that supports our dairy supply management system.”

  • Anne Cote is a Canadian dairy journalist.