US files formal trade complaint against Canada over dairy

The United States filed a second formal trade complaint against Canada on Wednesday, claiming that Ottawa’s dairy import policies harm American farmers.

Washington has requested consultations on dispute settlement under the US-Mexico-Canada Agreement, claiming that the changes to the dairy quota system announced last week do not address long-standing complaints and violate the trade agreement.

According to US Trade Representative Katherine Tai, the policy continues to “prevent US workers, producers, farmers, and exporters from reaping the full benefits of the market access that Canada committed to under the USMCA.”

Canada’s policies limit a large share of American dairy exports — including milk, butter, yogurt and ice cream — to Canadian processors under a system known as tariff rate quotas (TRQs), which US officials say restrict market access for US producers.

“I am deeply troubled by Canada’s decision to expand its dairy tariff-rate quota restrictions,” Tai said.

A TRQ applies a preferential tariff to a set volume or quota of product, and a higher duty for amounts above that level. Canada was permitted to use the system for 14 dairy product lines under USMCA — known in Canada as CUSMA — which came into force July 1, 2020, replacing the 1994 North American Free Trade Agreement.

Washington filed the first complaint in December 2020 and said it prevailed in the panel ruling in January.

Ottawa says the changes announced last week “fully comply with the panel’s findings.”

US Agriculture Secretary Tom Vilsack said Canada’s “protectionist dairy policies are a top concern.”

“Canada has failed to honor and implement its USMCA commitments by removing the trade restrictions that disadvantage and deter US dairy producers and exporters from enjoying real and meaningful access to the Canadian market,” he said in the statement.