Dairy groups applaud USTR move to confront Canadian government on USMCA violations

Some dairy groups have said they support US Trade Representative Robert Lighthizer in challenging measures adopted by the Canadian government that violate the US-Mexico-Canada agreement, which officially came into enforcement in July this year.

Lighthizer claims that dairy tariff-rate quotas allocated by Canada are harming American farmers' ability to properly market their products to Canadian consumers, a violation of the original USMCA agreement that intended for free trade among the North American continents.

A tariff-rate quota, or TRQ, is a "mechanism that provides for the application of a preferential rate of customs duty to imports of a particular originating good up to a specified quantity (in-quota quantity), and at a different rate to imports of that good that exceed that quantity," the USMCA agreement states. Canada has 14 of these TRQs, a percentage of which is set aside for specific Canadian processors, which is not permitted under the trade agreement.

"This restriction undermines the value of Canada’s TRQs for U.S. producers and exporters by limiting their access to in-quota quantities negotiated under the USMCA," a press release from Lighthizer's office said Dec. 9.

Lighthizer wrote an official notice to the Canadian Minister of Small Business, Export Promotion and International Trade, Mary Ng, in a letter. This would be the first enforcement action under the USMCA since it came into effect nearly six months ago. If the US and Canada are unable to reach a settlement, the US may request an independent dispute panel to intervene.

RELATED: Canada undermines U.S. dairy provisions of USMCA

"President Trump successfully renegotiated the USMCA to replace the failed NAFTA, and a key improvement was to give US dairy producers fairer access to Canada’s highly protected dairy market," Lighthizer said in the release.  "Canada’s measures violate its commitments and harm U.S dairy farmers and producers. We are disappointed that Canada’s policies have made this first ever enforcement action under the USMCA necessary to ensure compliance with the agreement. This action demonstrates that the United States will not hesitate to use all tools available to guarantee American workers, farmers, ranchers, and businesses enjoy the benefits we bargained for."

The National Milk Producers Federation and the US Dairy Export Council, currently led by US Department of Agriculture secretarial nominee Tom Vilsack, voiced joint support for the action. A letter from the two organizations said they have been concerned about the enforcement of USMCA, alleging that Canada "undermines" its trade obligations.

"USMCA is designed to improve trade with Canada, while modifying some of Canada’s trade-distorting dairy policies. We knew from day one that enforcement would be key to bringing the intended benefits home to America’s dairy industry. I applaud USTR for hearing our concerns and relying on our guidance to take this critical enforcement step to ensure that the agreement is executed in both letter and spirit," Vilsack said. "This is the critical first step, but more work may be needed to ensure Canada complies with its Class 7 related USMCA commitments as well."

The letter explained that both organizations had raised the alarm on Canada's trade commitments shortly after USMCA went into effect by producing a legal review of the country's TRQ system for USDA and USTR.

Additionally, 104 members of Congress signed a letter asking Lighthizer and current USDA Secretary Sonny Perdue to ensure Canada is meeting the trade agreement rules. Co-signers included Rep. Ron Kind, who represents Wisconsin's third congressional district, and Rep. Collin Peterson (D-MN), the outgoing chair of the House of Representatives agriculture committee.

"Canada must administer its TRQs fairly and in a manner consistent with its obligations under USMCA; it cannot be allowed to administer TRQs in a manner that discourages utilization or restricts the ability of the US dairy industry to completely fill the established TRQs at advantageous price points," the letter read.

Peterson and Rep. Jim Costa (D-CA), who is chairman of the Livestock and Foreign Agriculture Subcommittee in the House, also issued a joint statement on the matter: 

"We are glad USTR has heeded the recommendations of the bipartisan group of Members who have called for careful monitoring of Canada’s implementation of their dairy TRQ. US dairy farmers have faced enough challenges this year, and to accomplish the potential gains for dairy farmers in the USMCA, we have to make sure that the provisions of the agreement are fully enforced. Stability in the dairy sector depends on a level playing field for all parties, and today’s announcement is a good step toward ensuring those equal terms exist."