U.S. complaint over Canadian dairy access rejected by USMCA panel

A trade dispute settlement panel established under the United States-Mexico-Canada Agreement (USMCA) has rejected a complaint filed by the United States against Canada. The complaint pertained to Canada's alleged improper limitation of access to its dairy market. Highlights:

• U.S. Complaint: The United States had accused Canada of not fulfilling its obligations under the 2020 USMCA to open its dairy market to foreign producers. The U.S. claimed that Canada was not providing adequate access to its market.
• Panel's Decision: A three-person independent panel was convened to address this dispute. The panel ruled that Canada had not acted unreasonably in its handling of dairy market access, effectively dismissing the U.S. complaint. Their report was released on Friday (Nov. 24).
• U.S. Response: U.S. Trade Representative (USTR) Katherine Tai expressed disappointment with the ruling, emphasizing the U.S.' continued concerns regarding Canada's implementation of dairy market access commitments under the agreement. She stated that the U.S. would use all available tools to enforce trade agreements.
• Canada's Response: Canada's Trade Minister Mary Ng expressed satisfaction with the dispute settlement panel's findings, noting that all outcomes were in favor of Canada. She welcomed the decision.
• House Ag leaders’ statement: House Agriculture Committee Chairman G. T. Thompson (R-Pa.) and Ranking Member David Scott (D-Ga.) said: “We are disappointed in today’s announcement and the decision of the dispute panel. It is critical the U.S. encourage and enforce USMCA, and this decision allows Canada to continue their questionable protectionist practices that disallow fair access to Canadian markets. We appreciate Ambassador Tai and the Biden Administration’s continued pursuit to ensure fair market access for U.S. dairy producers.”

     Background: In a previous USMCA panel decision in January 2022, Canada was found to have violated the agreement by not opening its domestic market enough. Following that decision, Canada amended its policies. The USMCA retained Canada's supply management system, which limits domestic production of dairy, eggs, and poultry to support dairy farmers and protect them from import competition through high tariffs.

     Bottom line: Before taking the role of USTR, Tai was a major writer of the USMCA enforcement action language. The most recent U.S. trade policy loss again signals that the U.S. trade lawyers were again found wanting.

     Of note: The dairy sector is politically influential in Canada, with many farmers operating in Quebec and Ontario, provinces with a significant number of parliamentary seats.