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National Post | 17 May 2022
Dairy tariffs renew Canada-US trade spat, threats of retaliation
by Bryan Passifiume
Canada’s refusal to budge on dairy tariffs is whipping up discontent south of the border, and had at least two U.S. industry groups calling on Washington to retaliate.
On Monday, a joint press release by the National Milk Producers Federation (NMPF) and the U.S. Dairy Export Council (USDEC) urged Washington to impose retaliatory tariffs on Canadian dairy after a statement from Global Affairs Canada indicated Ottawa had no intentions to make changes to dairy tariff-rate quotas (TRQ.)
“Canada made a clear choice to thumb its nose at both the United States government and its international treaty obligations,” said NMPF CEO Jim Mulhern.
“Ottawa’s decision today is clearly designed to test our resolve by doubling-down on its longstanding dairy trade violations, ignoring both the spirit and the letter of its trade agreements.”
Ottawa’s decision, Mulhern continues, can only be met with retaliation — particularly if trade agreements are to be taken seriously.
On Monday, Global Affairs Canada announced the opening of the 2022-2023 dairy year TRQ application period — along with new amendments to Canada’s allocation policies under the Canada-United States-Mexico Agreement (CUSMA.)
These changes, according to the statement, include Canada’s removal of allocation holder pools under all CUSMA dairy TRQs, as well as including distributors as eligible parties under the agreement’s TRQs concerning industrial cheese.
“Given Canada’s deep concerns with the discriminatory electric vehicle tax credits proposed in the Build Back Better bill under U.S. Congress consideration, a decision regarding the potential allocation of the previously unallocated quota under the 2022 CUSMA calendar year dairy TRQs will be taken as the issue evolves, but not later than July 31,” the statement read.
“Any previously allocated and unused quota under the 2022 CUSMA calendar year dairy TRQs will remain valid until December 31, 2022.”
In January, a CUSMA arbitration panel ruled Canada was in violation of the now two-year old agreement by reserving the majority of its preferential dairy TRQs for local processors.
Rather than setting hard import limits, tariff-rate quotas (TRQs) allow nations to set preferential duties for certain products, permitting set quantities under certain categories to be imported into Canada at no or minimal cost.
Despite the ruling, Canada claimed the panel’s decision as a victory — describing the board’s decision as a vindication of Canada’s supply chain policies.
Canada maintains 14 dairy-specific TRQs under USMCA, including milk, cream, various grades of cheeses and products containing naturally-derived milk ingredients like ice cream.
The agreement — a replacement for the now-defunct North American Free Trade Agreement (NAFTA) — saw agriculture emerge as the treaty’s most contentious issue.
Instead of a trilateral consensus, Canada, the United States and Mexico opted to negotiate separate agreements between each partner.
Canada’s ag agreement with the U.S., for example, sets stiff tariffs and restrictions on both raw and processed products.
Krysta Harden, president and CEO of United States Dairy Export Council said Washington playing hardball is the only way to ensure Canada follows both the spirit and letter of the agreement.
“Canada simply refuses to institute real reform, and such actions must have consequences,” she said.
“Retaliatory tariffs are both fair and necessary in this circumstance, as clearly provided for by USMCA.”
United States Trade Representative Katherine Tai said Washington has yet to see any movement on the promises Canada made during the agreement’s 2020 talks.
“Our top priority remains ensuring that U.S. workers, producers, farmers, and exporters benefit from the market access they were promised under the United States-Mexico-Canada Agreement, and I communicated this directly to Canada before it published today’s notices,” she wrote in a statement released Monday.
“To date, we have not seen the promises by Canada in the USMCA fully realized. We will evaluate all options, and work with stakeholders and members of Congress, as we determine our next steps in the coming days.”