Adedokun Waliyu 
The Trudeau government is celebrating what it’s calling an absolute victory in its latest trade dispute with the United States over dairy imports.
American dairy farmers argued that the way the Canadian government allocates its tariff-free dairy import permits denies them full access to the 3.5 per cent share of Canada’s market they thought they’d gained in the revised North American free trade agreement.
A panel of experts, convened under the auspices of the now-renamed Canada-United States-Mexico Agreement (CUSMA), issued its draft findings in October and its final report on Nov. 10. The countries agreed it wouldn’t be made public until the Friday morning of the American Thanksgiving long weekend.
In a joint statement, International Trade Minister Mary Ng and Agriculture and Agri-Food Minister Lawrence MacAulay described the report’s findings as “clearly in favour of Canada.
“The government of Canada will continue to preserve and defend Canada’s supply management system, which supports producers by providing the opportunity to receive fair returns for their labour and investments, brings stability for processors and benefits consumers by providing them with a steady supply of high-quality products,” the joint statement said. “The government of Canada will also continue to work with processors and retailers to stabilize food prices.”
“I am very disappointed,” United States Trade Representative Katherine Tai said in her own statement Friday morning.
Despite the conclusions of this report, the United States continues to have serious concerns about how Canada is implementing the dairy market access commitments it made in the agreement. While the United States won a previous USMCA dispute on Canada’s dairy TRQ [tariff rate quota] allocation measures, Canada’s revised policies have still not fixed the problem for U.S dairy farmers,” the statement said.
“We will continue to work to address this issue with Canada, and we will not hesitate to use all available tools to enforce our trade agreements and ensure that U.S. workers, farmers, manufacturers and exporters receive the full benefits of the USMCA.”
As Tai’s statement suggests, Friday’s report is the second set of findings from a CUSMA dispute panel on fundamentally the same issues.
The first panel, convened after U.S. dairy industry complaints, issued a report early in 2022 that didn’t really settle the longstanding tensions between the two countries over their radically different dairy industries.
Canada’s dairy sector operates under a strict producer quota system in a highly regulated and relatively closed market. American farmers, meanwhile, operate without government restrictions on how much they can supply — but are subsidized by taxpayer funds in other ways to help keep dairy products affordable.
In competing media releases, both Canada and the U.S. claimed victory after that first panel report.
While Canada celebrated the fact that the first panel upheld its right to protect its domestic market by applying prohibitively steep tariffs to restrict imports, that panel also concluded that the way Canada administered its tariff rate quota was inconsistent with the language negotiated and agreed to by both countries when the trade agreement was revised in the fall of 2018.
Under policies revised in May 2022, Canada no longer allocates its limited import permits for tariff–free dairy products according to processor-specific pools.
That change didn’t address the chief American complaint, however. The U.S. argues that because the Canadian government decides who has the right to import dairy tariff-free, it’s able to effectively let Canada’s dairy processors decide which American products will compete with their own.
