U.S. Establishes Second USMCA Dispute Panel On Canadian Dairy Tariff-Rate Quota Policies

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Source: Office of the U.S. Trade Representative news release

United States Trade Representative Katherine Tai today announced that the United States is establishing a dispute settlement panel under the United States – Mexico – Canada Agreement (USMCA) regarding Canada’s dairy tariff-rate quota (TRQ) allocation measures. In this new panel proceeding, the United States is challenging Canada’s revised dairy TRQ allocation measures that use a market-share approach for determining TRQ allocations, and impose new conditions effectively prohibiting retailers, food service operators, and other types of importers from utilizing TRQ allocations. Through these measures, Canada undermines the market access it agreed to provide in the USMCA.

“Although the United States won a previous USMCA dispute on Canada’s dairy TRQ allocation policies, the Canadian government’s revised measures have not fixed the problem,” Ambassador Katherine Tai said. “With this panel request, we are utilizing our available tools to enforce our trade agreements and ensure that U.S. workers, farmers, processors, and exporters receive the full benefits of the USMCA. Canada made commitments to the United States in the USMCA, and the Biden-Harris Administration is ensuring that they honor those commitments.”

“Canada is a valued and important trading partner, but they continue to fall short of their USMCA obligations by denying U.S. dairy producers and exporters fair access to the Canadian market,” said Agriculture Secretary Tom Vilsack. “International trade is critical to economic growth and stability for American producers. This panel request is necessary to ensure Canada honors their commitments as they relate to dairy, and so American producers have greater export opportunities as intended.”

The United States has raised concerns under the USMCA previously about Canada’s dairy TRQ allocation measures. In December 2021, a USMCA dispute settlement panel found Canada’s dairy TRQ allocation measures to be inconsistent with Canada’s USMCA obligations. In response to the adverse findings of the panel, Canada introduced changes to its TRQ allocation measures, but these new policies are still inconsistent with Canada’s obligations under the USMCA.

In May 2022, the United States requested consultations with Canada to address its updated dairy TRQ allocation measures. In December 2022, the United States again requested consultations with Canada after identifying additional areas of deep concern with Canada’s dairy TRQ polices. The Parties held consultations on January 17, 2023, but were not able to resolve the matter. This is the second panel request that the Biden Administration has filed under Chapter 31 (Dispute Settlement) of the USMCA, specifically Article 31.6.1. Under the USMCA’s revised dispute settlement procedures, the panel is established upon delivery of the request (Article 31.6.4). Under the timeline provided in the USMCA, the panel is expected to issue a report later this year.

USTR officials have worked closely with staff from the U.S. Department of Agriculture on this matter, and both agencies will continue working together, in consultation with stakeholders, to obtain Canada’s full compliance with its USMCA dairy commitments.

A copy of the panel request is available here.

Background

This panel request is the most recent in a series of enforcement actions the United States has taken under the USMCA.

In July 2022, the United States requested USMCA dispute settlement consultations with Mexico concerning certain measures by Mexico that undermine American companies and U.S.-produced energy in favor of Mexico’s state-owned electrical utility, CFE, and state-owned oil and gas company, PEMEX. Those consultations are ongoing.

Under the Biden-Harris Administration, the United States has initiated the USMCA Facility-Specific Rapid Response Labor Mechanism (RRM) six times, seeking review by the Government of Mexico for alleged denial of rights at facilities in Mexico, including a request sent to Mexico yesterday. In addition, the U.S. Government engaged with Mexico to highlight issues at two other facilities prior to invoking the mechanism. Each of the concluded actions resulted in outcomes that are producing important, concrete results for workers, such as reinstatement and backpay for dismissed workers, increased opportunities for unions to organize and compete on equal footing, and monitoring of union representation elections, in which workers selected unions to represent them in free and fair elections.

In February 2022, the United States launched consultations with Mexico under the USMCA Environment Chapter regarding Mexico’s obligations to effectively enforce its fisheries-related laws, regulations, and other measures designed to prevent illegal, unreported, and unregulated fishing in the Upper Gulf of California, to prevent trafficking of protected species such as the totoaba fish, and to protect and conserve the critically endangered vaquita porpoise. Those consultations are ongoing.

Also, on three occasions, Ambassador Tai has requested Mexico’s cooperation under the bilateral Environment Cooperation and Customs Verification Agreement between the United States and Mexico (CVA) and Mexico agreed to work jointly with the United States on environmental enforcement matters.

These enforcement actions reflect the Biden-Harris Administration’s ongoing commitment to enforce the USMCA and to ensure that U.S. trade policy works for America’s workers.