The U.S.-Mexico-Canada Agreement is six months shy of its third anniversary and the United States already has requested a third set of bilateral consultations over its objections to Canada’s dairy quota system. U.S. trade representative Katherine Tai announced the request on Tuesday, saying the government has identified additional aspects of Canadian import rules that violate its agreement to allow a larger volume of U.S. dairy imports.
“Rather than work toward meeting its obligations, Canada persists in implementing new dairy policies that are inconsistent with the USMCA, and which continue to deny U.S. workers, farmers, producers, and exporters the full benefits of market access they were initially promised,” said Tai.
U.S. dairy groups applauded the move but were skeptical that consultations would succeed. The International Dairy Foods Association said it believed a formal trade challenge will be filed. Two groups representing dairy farmers said “the U.S. government has to be ready with retaliatory measures” if Canada refuses to change its policies.
Canada and the United States have feuded for years over access to Canadian consumers. The first complaint under the USMCA dispute settlement system was the U.S .request, on Dec. 9, 2020, for consultations over dairy. “Canada’s measures violate its commitments and harm U.S. dairy farmers and producers,” said the Trump administration. The United States prevailed in a trade panel ruling on the matter, released at the end of 2021.
U.S. trade officials asked for a second set of consultations on May 25, saying Canada continued to shirk its USMCA commitments although it adjusted its tariff-rate quota (TRQ) system after the USMCA ruling. On Tuesday, they said U.S. concerns “have only increased” with the discovery of additional aspects of the TRQ system that reduced the flow of Canadian imports.
For example, said the U.S. trade office, Canada decided that retailers and food-service operators were ineligible to apply for a share of the dairy TRQs. Canada also used a shifting set of factors in deciding how large a share of the TRQs would be available to applicants, with processors in line for the largest share. And it required applicants to be in business for at least 12 months before they could apply for a TRQ. The tariff-rate quota systems allows a specified amount of goods to enter a nation at low or no duties.
To read the U.S. request for consultations, click here.