Canada’s dairy quotas don’t limit US access, panel finds

Canada’s dairy import quotas don’t unfairly limit access for US producers, according to a panel ruling under North America’s trade pact, marking a major victory for a Canadian sector long accused of protectionism.

A majority of the dispute-settlement panel members found that the quotas aren’t inconsistent with the US-Mexico-Canada Agreement, ruling against all of the American arguments against Canada’s restrictive system.

“Canada is very pleased with the dispute-settlement panel’s findings, with all outcomes clearly in favor of Canada,” Trade Minister Mary Ng said Friday in a statement. “This is good news for Canada’s dairy industry and our system of supply management.”

The decision, which can not be appealed, means Canada won’t have to make any further changes to the system that has been a long-standing trade irritant between the countries. Canada has firmly controlled dairy supplies for decades, limiting domestic production and applying heavy tariffs to restrict imports, in an effort to stabilize incomes for local farmers.

US Trade Representative Katherine Tai said she was “very disappointed” by the panel’s findings.

“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,” she said Friday in a statement. “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 US workers, farmers, manufacturers and exporters receive the full benefits of the USMCA.”

Under the USMCA that took effect July 2020, Canada conceded to granting more duty-free or lower tariff access across dairy products including milk, cream, cheese, yogurt and ice cream via a tariff-rate quota. But Canada was allocating the bulk of those imports to processors, limiting the ability of other groups like retailers and food-service operators to buy US product.

The US won a ruling from a first dispute-settlement panel in 2021, forcing Canada to tweak its quota allocations. But Tai argued the changes failed to fix the problem and requested a second panel. The ruling was disclosed to the parties on Nov. 10 and made public on Friday.

Canada’s government will continue to “preserve and defend” the supply-management system, Ng said. The system “supports producers by providing the opportunity to receive fair returns for their labor and investments, brings stability for processors and benefits consumers by providing them with a steady supply of high-quality products,” she said.