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US initiates second USMCA dispute over Canada’s TRQs

In the latest dispute, the U.S. is challenging Canada’s dairy tariff rate quota (TRQ) allocation measures and its failure to fully allocate its annual dairy TRQs.

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US is challenging Canada’s dairy tariff rate quota allocation measures

The United States has initiated a second dispute under the United States-Mexico-Canada Agreement (USMCA) over dairy restrictions by Canada that the U.S. says are contrary to the trade agreement’s commitments.

In January, the first ever Dispute Settlement Panel formed under the USMCA ruled in favor of the U.S. in its first ruling, in a dispute about Canadian dairy tariff rate quotas (TRQs). In March, U.S. dairy groups rejected a proposal by the Canadian government for changes to the way it allocates TRQs for U.S. dairy.

“While the United States prevailed in the first dispute, Canada’s implementation measures and other actions have moved Canada further away from full compliance with its USMCA obligations,” according to a press release from U.S. Trade Representative Katherine Tai’s office. “If the United States and Canada are not able to resolve U.S. concerns through consultations, the United States may request the establishment of a panel under the USMCA.”

In the latest dispute, the U.S. is challenging Canada’s dairy TRQ allocation measures, which it says denies allocation access to eligible applicants, including retailers, foodservice operators, and other types of importers, and imposes new conditions on the allocation and use of the TRQs.

The United States is also challenging Canada’s failure to fully allocate its annual dairy TRQs; Canada is instead parceling out a few months’ quota at a time. Through these measures, Canada undermines the market access that it agreed to provide in the USMCA, according to the press release.

“I am deeply troubled by Canada’s decision to expand its dairy tariff-rate quota restrictions,” Tai said. “We communicated clearly to Canada that its new policies are not consistent with the USMCA and prevent U.S. workers, producers, farmers, and exporters from getting the full benefit of the market access that Canada committed to under the USMCA. We will continue to work with USDA to ensure that our dairy industry can bring a wide range of high-quality American products to Canadian customers.”

U.S. Agriculture Secretary Tom Vilsack said Canada’s “protectionist dairy policies” are a “top concern” for the White House.

“Canada has failed to honor and implement its USMCA commitments by removing the trade restrictions that disadvantage and deter U.S. dairy producers and exporters from enjoying real and meaningful access to the Canadian market,” Vilsack said in the press release. “Obtaining that access remains a top priority for the administration and we are considering all options available to achieve this objective.”

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