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U.S. says losing dairy trade dispute with Canada is a major setback



U.S. says Canada continues to overly restrict U.S. dairy products from its markets.

A trade dispute settlement panel has rejected a complaint that Canada has overly restricted its dairy products market to U.S. farmers.

In a decision released Friday, the three-member panel established under the United States-Mexico-Canada Agreement (USMCA) ruled that Canada had not acted unreasonably.

For many years, the Canadian government has restricted the amount of imported dairy products at duty-free or low tariffs. Higher amounts have been subject to steep tariffs, in some cases nearly 300%, essentially shielding Canadian farmers from foreign competition.

In 2022, a USMCA panel ruled that Canada had violated the trade agreement by not opening its market enough. Canada then amended its policies, but the U.S. complained it wasn’t enough.

Friday’s decision went in favor of Canadian farmers who worry about being inundated by U.S. dairy products from Wisconsin, New York, and other states not far from their border.

“This is good news for Canada’s dairy industry and our system of supply management,” Canadian Trade Minister Mary Ng said in a statement.

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

U.S. officials and dairy industry groups said they were disappointed in the ruling.

“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,” U.S. Trade Representative Katherine Tai said 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 U.S. workers, farmers, manufacturers and exporters receive the full benefits of the USMCA,” Tai said.

American dairy farmers, including some from Wisconsin, have blamed Canada for choking off sales of their milk, especially when the U.S. has surpluses and relies on foreign markets to balance inventories.

Friday’s announcement was a major setback, according to U.S. dairy industry groups.

“This ruling has unfortunately set a dangerous and damaging precedent,” said Krysta Harden, president and CEO of the U.S. Dairy Export Council.

It was “profoundly disappointing,” said Jim Mulhern, president and CEO of the National Milk Producers Federation.

“The dispute panel has ruled in favor of obstruction of trade rather than trade facilitation,” Mulhern said.

The fortunes of U.S. dairy are intertwined with those of its closest neighbors, Mexico and Canada.

More than 25 years ago, the North American Free Trade Agreement rewrote the rules of trade between the three countries.  Mexico’s borders have been largely open to free trade, which has meant a flood of imports, primarily from the United States. In contrast, Canada has protected its markets from U.S. milk production which far exceeds what Canadian farmers produce.



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