American trade officials and Canadian ministers both claimed victory last week in a dairy issue that was once again a bone of contention.
But bluster doesn’t make it so, regardless of side.
In December 2020, with the ink nicely dry on the Canada-United States-Mexico Trade Agreement, the Americans launched complaints against Canada’s supply-managed dairy industry. Those complaints have now faced initial hearings and rulings. So far, the score is U.S. one, Canada zero.
One of the concessions Canada made in the CUSMA was to allow greater access for American dairy products into the Canadian market. Those are described as tariff rate quotas, or TRQs. They govern the quantities of milk, cheese, industrial cheese products, dried dairy powders, yogurt, ice cream and eight or so other categories of dairy that can be imported at duties lower than those on dairy products from other nations.
Canada agreed to increase those under CUSMA but it allocated more than 85 percent of the imported TRQ products to processors, and some was specifically allocated to Canadian processors. The Americans want some of that shifted to American dairy producers, but not individual producer groups. However, they also agree that Canada has the right to allocate the TQRs and manage its national dairy system as it chooses.
Federal trade minister Mary Ng and agriculture minister Marie-Claude Bibeau claimed victory, despite an arbitration panel’s ruling that said Canada was in breach of the agreed terms and has until Feb. 3 to respond or comply with the ruling.
United States Trade Representative Katherine Tai used her soapbox to describe the minor adjustment to the agreement as an “historic win (that) will help eliminate unjustified trade restrictions on American dairy products.”
In Canada the ministers claimed the loss was “overwhelmingly in favour of Canada and its dairy industry” because it shows CUSMA’s acknowledgement that Canada has the right to regulate its dairy market and doesn’t challenge the supply management model.
The agreement has had two years to percolate but still isn’t fully brewed.
The TRQs, while important for the Canadian industry, are a drop in the milk pail when it comes to American markets and production. However, their application remains a rural hot potato that offers some easy American political wins, or at least easy targets, because there is little risk of losing face during a challenge. The United States has lost decisions on the dairy issue four times in the past.
Canadian dairy farmers said last week that they want the federal government to adjust the TRQs to meet the trade decision’s requirements. That said, it’s interesting that Canada has allocated pooled TRQ amounts only to processors, on supply managed products, in other trade deals since 1995 without complaints. Yet in this case, Canada lost the argument.
It is important to remember that the U.S. lost the country-of-origin meat labelling argument with Canada several times and then dragged its feet on compliance with a World Trade Organization ruling. That cost Canadian farmers billions of dollars.
When Canada loses what appears to be a fair arbitration decision, it shouldn’t dally. It should take the high road, implement the terms, if we can figure out what they are, and move on.