U.S. seeks new dispute panel over Canadian dairy imports

By David Lawder

WASHINGTON (Reuters) - The United States on Tuesday said it was seeking a second trade dispute settlement panel over Canada's dairy import quotas, charging that Canada was still not meeting obligations to open its market to American producers.

The U.S. Trade Representative's office said it was challenging Canada's revised tariff-rate quota (TRQ) allocations that were put in place last year after a previous dispute panel decision under the U.S.-Mexico-Canada Agreement on trade.

USTR said in a statement that Canada was unfairly using a market-share approach for determining quota allocations, and had imposed new conditions that effectively prohibit Canadian retailers, food service operators, and other types of importers from utilizing import quota allocations.

Limited access to Canada's dairy market for U.S. producers was granted as part of the renegotiation of the former North American Free Trade Agreement (NAFTA) in 2018, but tensions over dairy trade ran high even as the USMCA deal was being signed by then-president Donald Trump.

U.S. producers were unhappy with the way Canada had allocated TRQs, which allow specific quantities of products from raw milk to cheese to cross the border at lower or zero tariffs, reserving them exclusively for Canadian processing firms. After months of consultations, USTR requested a dispute panel in 2021, which ruled that Canada's practices violated its USMCA obligations.

"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 in a statement, adding that she would use all available tools to ensure that U.S. farmers, dairy processors and workers receive the "full benefits of the USMCA."

Canada's trade minister, Mary Ng, said in a statement issued in Ottawa that she was 'disappointed' in the U.S. move and would defend Canada's longstanding Supply Management system that protects Canadian dairy farmers with production quotas and high tariffs on dairy imports.

"We will stand firm against attempts to re-negotiate during this dispute settlement panel process," Ng said.

(Reporting by David Lawder in Washington, Additional reporting by Steve Scherer in Ottawa; Editing by Andrea Ricci)

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