United States Establishes Second USMCA Dispute Panel on Canadian Dairy Tariff-Rate Quota Policies

United States Trade Representative Katherine Tai announced on January 31, 2023, that the United States is establishing a dispute settlement panel under the United States – Mexico – Canada Agreement (USMCA) regarding Canada’s dairy tariff-rate quota (TRQ) allocation measures. In this new panel, the United States is challenging Canada’s revised dairy TRQ allocation measures that use a market-share approach for determining TRQ allocations, and impose new conditions effectively prohibiting retailers, food service operators, and other types of importers from utilizing TRQ allocations. Canada undermines the market access through these measures that they agreed to provide in the USMCA. 

“Although the United States won a previous USMCA dispute on Canada’s dairy TRQ allocation policies, the Canadian government’s revised measures have not fixed the problem,” Ambassador Katherine Tai said.  “With this panel request, we are utilizing our available tools to enforce our trade agreements and ensure that U.S. workers, farmers, processors, and exporters receive the full benefits of the USMCA.  Canada made commitments to the United States in the USMCA, and the Biden-Harris Administration is ensuring that they honor those commitments.”  

“Canada is a valued and important trading partner, but they continue to fall short of their USMCA obligations by denying U.S. dairy producers and exporters fair access to the Canadian market,” said Agriculture Secretary Tom Vilsack. “International trade is critical to economic growth and stability for American producers. This panel request is necessary to ensure Canada honors their commitments as they relate to dairy, and so American producers have greater export opportunities as intended.”

The United States has previously raised concerns under the USMCA about Canada’s dairy TRQ allocation measures. In December 2021, a USMCA dispute settlement panel found Canada’s dairy TRQ allocation measures to be inconsistent with Canada’s USMCA obligations. Canada responded to the adverse findings of the panel by introducing changes to its TRQ allocation measures, but these new policies are found to be inconsistent with Canada’s obligations under the USMCA. 

In May 2022, the United States requested consultations with Canada to address its updated dairy TRQ allocation measures. In December 2022, the United States again requested consultations with Canada when additional areas of deep concern with Canada’s dairy TRQ policies were identified. The Parties held consultations on January 17, 2023, which is the second panel request that the Biden Administration has filed under Chapter 31 of the USMCA, but were not able to resolve this matter. Under the USMCA’s revised dispute settlement procedures, the panel is established upon delivery of the request (Article 31.6.4). Under the timeline provided in the USMCA, the panel is expected to issue a report later this year. 

USTR officials have worked closely with staff from the U.S. Department of Agriculture on this matter, in consultation with stakeholders, to obtain Canada’s full compliance with its USMCA dairy commitments. 

A copy of the panel request, embargoed until 2:00 pm, is available here. 

Crane Trade Services can assist you with questions regarding this matter.  For assistance please contact CWTSConsulting@craneww.com.