USMCA Panel Gives US a Win Over Canada in Dairy Dispute

WASHINGTON — The United States has prevailed in the first dispute resolution case brought under the United States-Mexico-Canada Agreement, known more commonly as USMCA.

The case before the inaugural dispute settlement panel was a long-running dispute over Canadian trade policies intended to shield its dairy industry from American competition.

At its center was a U.S. claim that Canada unfairly manipulated a complex array of tariff-rate quotas and set aside a sizable share of the Canadian dairy market solely for its homegrown dairy processors.

Not only were these actions far from “fair” and “equitable,” but they effectively breached the USMCA — the replacement of the old North American Free Trade Agreement between the three parties — right out of the gate, the U.S. argued.

An attempt to negotiate a settlement of the dispute in December 2020 failed, and a three-member panel heard the case in Ottawa, Canada, on Oct. 25 and 26, 2021. 

The panel ultimately ruled that Canada’s efforts to restrict U.S. dairy products were inconsistent with its USMCA obligations among the three countries, which were agreed upon in 2018 and took effect in 2020. 

Canada has until Feb. 3 to bring its policies into compliance, or else face possible tariffs or other countermeasures from the U.S.

“Enforcing our trade agreements and making sure they benefit American workers and farmers is a top priority for the Biden-Harris Administration,” U.S. Trade Representative Katherine Tai, said in a written statement.

“This historic win will help eliminate unjustified trade restrictions on American dairy products, and will ensure that the U.S. dairy industry and its workers get the full benefit of the USMCA to market and sell U.S. products to Canadian consumers,” she said.

Among those who applauded the U.S. victory in the dispute was Sen. Ron Wyden, D-Ore., chairman of the Senate Finance Committee.

“The United States’ win today against Canadian trade barriers for U.S. dairy products proves that trade done right can deliver real results for our farmers and workers,” Wyden said. “Despite agreeing to open its market to a host of American dairy products in the USMCA, Canada denied our farmers these benefits. 

“USTR’s monitoring of USMCA implementation identified this failure and held Canada to its promise. Democrats insisted on strong enforcement in this deal, so I am particularly pleased USTR was able to take effective action to ensure that our farmers received what we bargained for in USMCA,” he said.

As for the Canadians, a statement from the country’s trade and agriculture ministers said the nation would “continue to stand up for its dairy industry, farmers and workers, and the communities they support.”

Canada is home to about 11,000 commercial farms, most of them located in the rural central part of the country.

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