CPTPP panel sides with New Zealand over Canada’s dairy supply-management rules

A Pacific Rim trade dispute panel has found Canada’s dairy-sector protections violate obligations that Ottawa signed with New Zealand and other countries

The Liberal government, however, insists the ruling is a win, pointing to a clause that confirms Canada has some discretion over its imports.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership includes certain quotas for countries to export dairy at preferred tariff rates into other member countries.

 

 

 “The outcome of the panel process leaves Canada no choice but to finally make TRQs available to those market players who have an incentive to use them”

 

New Zealand says Canada is limiting its quotas to protect domestic dairy processors, who operate under federal rules regulating the cost and supply of products such as milk and cheese.

The country argues its dairy sector has lost the equivalent of $96 million in revenue from the Canadian market in the past three years due to the federal government “effectively blocking access for our dairy industry to upscale its exports” to Canada.

Export Promotion, International Trade and Economic Development Minister Mary Ng answers media questions in Jakarta, Indonesia on Tuesday, Sept. 5, 2023. A Pacific Rim trade panel has found Canada’s dairy-sector protections violate obligations Ottawa signed with countries like New Zealand. THE CANADIAN PRESS/Sean Kilpatrick

The dispute settlement panel issued a report on Tuesday that says it agrees with part of New Zealand’s complaint, which dates back to May 2022. The panel ordered Ottawa to change how it uses tariff rate quotas, often called TRQs.

“It’s an important recognition that our exporters have not had fair access to the Canadian dairy market, in line with what we negotiated and paid for under CPTPP,” wrote New Zealand’s High Commissioner to Canada, Martin Harvey, in a statement.

“The outcome of the panel process leaves Canada no choice but to finally make TRQs available to those market players who have an incentive to use them,” Harvey wrote, adding that he is confident the ruling wouldn’t hinder relations between the two countries.

Australia and Japan filed submissions in support of New Zealand, while Mexico, Peru and Singapore also expressed an interest in pushing back against Canada’s use of dairy quotas.

Tuesday’s dispute-settlement report sided with New Zealand on two complaints, finding the country could not use Canada’s quotas and that Canada gave priority access to its own dairy processors, while rejecting two other arguments.

The report noted it was “informative” that Washington had won a separate case on similar grounds to those raised by New Zealand, during a dispute under the Canada-United States-Mexico Agreement, which replaced the NAFTA trade deal.

Canadian Trade Minister Mary Ng did not speak to Ottawa’s losses, instead saying it was a “clear victory” that the ruling acknowledged Canada has some leeway in how it applies the trade agreement.

“It confirms that Canada has the discretion to allocate TRQs, and that’s really important to us,” Ng told reporters Wednesday in Jakarta.

“They didn’t think that we were allocating our TRQs in the way that they would like.”

Canada’s influential domestic dairy lobby is calling on Ottawa to see whether it can launch retaliatory complaints against New Zealand.

“Dairy Farmers of Canada is disappointed with the dispute panel’s ruling,” wrote the group’s president David Wiens.

“We now call on the federal government to do a thorough review of the measures the government of New Zealand has put in place to support its dairy sector, to ensure that they are consistent with its international trade obligations.”