Interest | 10 May 2023
A submission published by Australia’s Department of Foreign Affairs and Trade suggests New Zealand’s argument is sound regarding dairy access to Canada
by Eric Frykberg
The Australian Government has indicated it supports New Zealand in its trade battle with Canada.
Australia has joined the argument as a third party and a submission from Australia’s Department of Foreign Affairs and Trade (DFAT) indicates Canberra basically agrees with New Zealand’s position.
This argument began when Wellington accused Ottawa of unfairly blocking New Zealand dairy exports in breach of the Comprehensive and Progressive Trans Pacific Partnership (CPTPP) which both countries have signed.
New Zealand argued that Canada was illegally awarding Tariff Rate Quotas (TRQs) for dairy products to its own producers when they were supposed to be available to export nations like New Zealand.
As a result, New Zealand said it had access to only 9% of Canada’s TRQs and was faced with paying 200% to 300% tariffs on the remainder, at a cost of $68 million in potential sales over two years.
The matter is now under arbitration after New Zealand filed an official complaint. Several nations have since joined the dispute as third parties.
Australia is one of them and its submission said New Zealand basically had it right.
" Australia considers that these proceedings initiated by New Zealand ..... raise significant systemic issues concerning the substantive legal obligations and rights of CPTPP Parties," the Australian submission says.
"It is fundamental to the rules-based trading system that free trade agreement (FTA) parties uphold their obligations, including in relation to market access."
Australia went on to say that its dairy sales to Canada had increased since CPTPP came into force. But it was still kept out of some sections of the Canadian market. While Canberra recognised Canada’s intensive regulation of the dairy industry via its supply management system, this should not be used to to block trade.
"Canada cannot, consistently with its CPTPP commitments, use its supply management system to subvert CPTPP market access outcomes," the Australian team wrote.
"In applying the object and purpose of the CPTPP to the ordinary meaning of its articles, Parties are entitled to expect an interpretation that promotes greater trade liberalisation and access to markets.
"This is subject to the Parties’ legitimate right to regulate. However, that recognised right to regulate ..... does not support new and independent rights such as the right to protect domestic industry."
Australia is just one of several countries to register as third parties to the dispute.
Japan and Mexico are among others. The comments by these and other third parties might be taken into account by the arbitration panel but will not be ruled on per se.
While this dispute is a first under CPTPP, a legal expert on trade matters, who spoke on the condition of anonymity, said the same rules would apply as occur under WTO hearings. The adjudication panel might refer to third party arguments, the expert said, and might be informed by them.
But it was under no obligation to address the points that were made by the third parties was only allowed to adjudicate on the application by the primary party and on the arguments of its adversary.
The dispute hearing is half way through and should be finished by September.