On Tuesday, the dispute settlement mechanism under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) was finally put to the test. The CPTPP’s first formal trade dispute saw New Zealand argue that Canada’s dairy tariff-rate quota (TRQ) allocation measures undermine the market access afforded to New Zealand under the CPTPP.
A three-member expert panel agreed with New Zealand on two of its complaints, finding that New Zealand exporters were unable to fully tap into Canada’s dairy quotas and that Canada was providing priority access to domestic dairy processors. The panel ordered Canada to adjust its TRQ measures to align with CPTPP obligations. The panel rejected two other complaints by New Zealand, finding that Canada did have some authority in how it implemented its TRQs.
Dairy accounts for about one-third of New Zealand’s merchandise exports and 3.1 per cent of its GDP.
Everyone’s a winner
Following the verdict, Wellington claimed victory in a press release, calling it “a significant win for our primary sector exporters.” Canada’s trade minister Mary Ng and agriculture and agri-food minister Lawrence MacAulay, meanwhile, said in a statement that the panel’s report was “a clear victory for Canada.” Advocacy group Dairy Farmers of Canada, however, said it was “disappointed” with the outcome. New Zealand launched formal consultations over the dairy dilemma with Canada in May 2022 and requested a formal dispute settlement panel six months later. Damien O’Connor, New Zealand’s trade and export growth minister, told Radio New Zealand this week that Canada’s actions cost New Zealand exporters about C$97 million over three years in lost market access.
CPTPP members watch from the sidelines
CPTPP members Australia and Japan were formal third-party members to the dispute, while Mexico and Singapore observed the dispute panel hearings remotely. In a written submission to the dispute panel earlier this year, Australia, backing New Zealand, stated that “Canada's supply management system is highly restrictive and protects Canada's dairy industry from competition.”
The dairy duel represents a rare irritant between Canada and New Zealand. O’Connor said last year that the relationship between the Five Eyes partners remains “excellent” despite the dispute.