U.S. dairy groups call for retaliatory tariffs against Canada under USMCA

Trade tensions are on the rise as some groups are calling on the U.S. government to impose retaliatory tariffs in response to Canada’s handling of dairy tariff-rate quotas (TRQs) under the United-States-Mexico-Canada Agreement (USMCA/CUSMA).

The call on the U.S. government comes from the U.S. Dairy Export Council (USDEC) and the National Milk Producers Federation (NMPF) with rising concerns of suitable and compliant dairy market access.

The U.S. issued the first challenge under the USMCA regarding handling of access to Canada’s supply-managed dairy sector, through tariff-rate quotas.

The dairy council issued a statement outlining a U.S. initiated CUSMA dispute resolution panel that was formed at the beginning of 2022 to address this issue. The statement says the “U.S. found that Canada’s dairy tariff-rate quotas (TRQs) system violates the terms of USMCA. Canada issued a new TRQ proposal in March which included only inconsequential changes.”

Background: U.S. sours on Canada’s handling of dairy TRQs

However, Mary Ng, federal minister of international trade and export promotion, shares a different perspective on the findings of the dispute panel, stating the following shortly after the USDEC’s initial press release:

“Following public consultations from March 2 to April 19, Canada has published new CUSMA dairy TRQ allocation and administration policies. The CUMSA 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.”

Further, she says that Canada takes commitments and obligations under international agreements seriously and states they are “confident that the new policies fully comply with the panel’s findings and its recognition that Canada has the full discretion to administer its TRQs under CUSMA in a manner that supports Canada’s supply management system for dairy.”

Organizations and councils south of the border, including but not limited to NMPF, have a different opinion on the matter saying Canada is “completely disregarding” the agreement.

“Canada made a clear choice to thumb its nose at both the United States government and its international treaty obligations. It has completely disregarded the USMCA agreement signed just a few short years ago,” says Jim Mulhern, president and CEO of NMPF. “Ottawa’s decision today is clearly designed to test our resolve by doubling down on its longstanding dairy trade violations, ignoring both the spirit and the letter of its trade agreements. That decision demands retaliatory action by the U.S. government. Otherwise, our trade agreements will be seen as toothless before the ink is dry.”

Canada however, is standing by the changes to the TRQs and says they are also standing by the dairy industry, farmers and workers and the communities they support, stating now more than ever as “global food security is under threat.”