Background

The Office of the U.S. Trade Representative reports that the U.S. has filed its first-ever enforcement action under the U.S.-Mexico-Canada Agreement, challenging Canada’s practice of setting aside and reserving a percentage of each of its dairy tariff-rate quotas exclusively for processors. The two sides will first hold consultations on the matter but the U.S. may request the establishment of a dispute settlement panel if talks are unsuccessful at resolving its concerns.

USTR states that one of the key improvements of the USMCA over NAFTA was “fairer access to Canada’s highly-protected dairy market.” Under this agreement Canada has the right to maintain 14 TRQs on dairy products, including milk, cream, skim milk powder, butter and cream powder, industrial cheeses, cheeses of all types, milk powders, concentrated or condensed milk, yogurt and buttermilk, powdered buttermilk, whey powder, products consisting of natural milk constituents, ice cream and ice cream mixes, and other dairy.

However, in notices to importers published in June and October Canada set aside and reserved a percentage of these TRQs for processors and so-called further processors. USTR states that these restrictions are contrary to Canada’s USMCA commitments and limit the access of U.S. producers and exporters to the in-quota quantities negotiated under the USMCA.

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