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As USMCA Dairy Dispute Plays Out, Here's Why It Could Be a Positive for U.S. Dairy Farmers

Tyne Morgan

May 27, 2021

The Biden Administration has officially launched a dispute against the Canadian dairy industry in an effort to enforce dairy market obligations negotiated in the U.S.-Mexico-Canada Agreement (USMCA).

U.S.Trade Representative Katherine Tai announced this week the U.S. has requested and established a dispute settlement panel under the USMCA. According to USTR's office, the request seeks to review measures adopted by Canada that quote "undermine the ability of American dairy exporters to sell a wide range of products to Canadian consumers."

Specifically, the U.S. is challenging Canada's allocation of dairy tariff-rate quotas, and the setting-aside of a percentage of each dairy TRQ exclusively for Canadian processors.

"This is an important step for American agriculture, and one that brings the U.S. dairy sector closer to realizing the full benefits of the USMCA," said Agriculture Secretary Tom Vilsack in response to the news. "Ambassador Tai's action today will help ensure that Canada upholds its commitments under the USMCA and puts our other agricultural trading partners on notice that they must play by the rules. I am hopeful of a swift resolution that allows Canadian consumers access to high-quality U.S. dairy products and delivers the economic opportunities promised under USMCA to U.S. dairy farmers."

After all three countries came to an agreement on the USMCA terms, the trade pact went into effect on July 1. Nearly a year later, U.S. officials say Canada hasn't made the changes agreed upon, something that comes as no surprise to agricultural economist Scott Brown.

"I think they ultimately probably will follow through at the end of the day," says Brown, a University of Missouri agricultural economist. "I think they were waiting for us to hold their feet to the fire potentially a little bit. But they were negotiating, I think, in good faith on a number of things. And dairy is a very tough issue for them. It's one where they've provided a lot of protection for their producers. I'm not surprised to see them slow in terms of making the changes needed under USCMA."

Scott says the case by the U.S. is needed in order to get Canada to ultimately follow-through with the dairy provisions within USMCA, even though it won't have a sudden impact on milk prices here in the U.S.

"I do think it's a positive for the U.S. dairy industry as a whole, if we see some breakthrough in terms of what happens in trade between us and and Canada," says Brown. "I'm not sure that we're going to talk about large changes in prices as a result of the USMCA for producers in this country. But it's certainly a positive. I always like to remind us that for those states that might be laying along the Canadian border, there might be more opportunity for products and maybe some slightly higher prices there than other parts of the country."



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