Canadian dairy protectionism under fire . . .
In an international first, New Zealand has initiated dispute settlement proceedings under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) against Canada for restrictions in its dairy market. New Zealand alleges that the implementation of Canada’s dairy tariff rate quotas (TRQs) is inconsistent with its obligations under the CPTPP. It says unfulfilled Canadian TRQs represent a C$55-million loss for New Zealand dairy exporters in the past two years, resulting from the TRQs remaining largely unfilled because the right to import has prioritized Canadian domestic producers. Ninety per cent of import licences are allocated to Canadian dairy producers, limiting retail grocery distributors’ ability to import foreign products. Dairy imports outside of the TRQs are subject to tariffs as high as 300 per cent.
CPTPP’s honeymoon phase ends . . .
Three years into the CPTPP, most analysts consider the pact to be successful at reducing tariffs and liberalizing trade. The New Zealand action initiated last week did not come as a surprise, as Canada’s dairy supply management system has been disputed multiple times by key trading partners. But this dispute will be a first test of the CPTPP’s dispute settlement mechanism, which allows parties to reach a mutually agreeable resolution without involving a panel unless such an outcome cannot be achieved.
Dairy challenges from Canada’s closest friends . . .
New Zealand’s dispute is not the only recent challenge involving Canada’s dairy industry. In January, a dispute panel under the Canada-United States-Mexico Agreement (CUSMA) sided with the U.S. in finding that reserving most of its TRQs for Canadian producers violated Canada’s commitments under that deal. New Zealand’s dispute mirrors that of the U.S., but Canada still seems unwilling to give in to its trade partner’s demands at the fear of domestic political backlash. The Canadian dairy industry is influential in Ottawa, with support for dairy farmers being a politically sensitive issue, particularly in Quebec. Although pressure is coming from all sides, the federal government’s position remains unchanged – a position which has remained consistent over decades, regardless of which federal party is in power. While Canada still faces possible retaliatory tariffs from the United States, the federal government has until today to respond to New Zealand’s complaint.
- Bloomberg: New Zealand says Canada isn’t fulfilling CPTPP dairy obligations
- Financial Post: New Zealand cheers Canada's loss in dairy dispute and calls for 'significant reform'
- The Globe and Mail: New Zealand challenges Canada over dairy imports