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Dairy Dilemma: Why the U.S. is Ensuring Canada Makes Good on USMCA Promises

Tyne Morgan

December 11, 2020

Five months after the U.S., Mexico, Canada agreement (USMCA) went into effect, and the U.S. isn’t happy with how it’s being implemented. This week the U.S. took the first step in ensuring Canada enforces all aspects of the agreement. And one of the most contentious issues is over implementation of the dairy market access changes within the agreement.

USMCA was designed to break through what the U-S dairy industry saw as long-standing issues in gaining market access into Canada. The contention today is over tariff rate quotas- or TRQs- which are products going into Canada at a reduced tariff rate.

As reported by Farm Journal’s MILK, the U.S. Trade Representative on Wednesday announced they will initiate official consultations with Canada to examine the country’s TRQ obligations.

Michael Dykes of International Dairy Foods Association told Farm Journal the reason USTR’s office took action is Canadians aren’t administering TRQs as agreed, which is denying some U.S. dairy producers from selling into the Canadian market. International Dairy Foods Association (IDFA) IDFA was one of several dairy groups applauding the USTR’s taking initial action to enforce the deal.

“What the Canadians are doing, they're not administering those agreed terms of the agreement as the way they were agreed,” Dykes told Farm Journal. “They're giving most of those opportunities to import products, a quantity of dairy products at a reduced tariff, to people who are already making those products. So, you're allowing people to bring them in from the U.S., to the people that are already making them to do that they have no desire to bring those in from U.S. We were getting no access, it's meaningless.”

Dairy was one of the last issues trade representatives worked through to finalize the USMCA, and U.S. dairy leaders knew it would be difficult to break through barriers and get more U.S. dairy products into Canada. Still, despite all the effort in crafting an agreement that both Canada and the U.S. could agree upon, Dykes expected Canada to uphold its end of the deal.

“I did expect meaningful difference in dairy [with USMCA],” he says. “The reason I did is because I know it's been such a long-standing effort. I had many conversations with Ambassador Lighthizer and with Ambassador Doud to explain the whole dairy scenario. And the three of us even talked and said, ‘we need to hold their feet to the fire to live up to the terms.’ So, when we went back to USTR, and I first raised this TRQ problem, we told them Canada isn’t doing what we hoped they wouldn't do.”

Dykes thinks the case will continue, even under a new administration, and he’s hopeful Canada takes necessary steps to hold up its end of USMCA on dairy.

“I think they will continue to work this case. This is the very first step of it,” says Dykes. “Let's keep in mind me, the people at USTR that work on these issues will still be there. They're civil servants. The folks that are behind the facts and did all the homework remain, because sometimes those of us in food and agriculture want to see them act faster. But to their credit, they always want to make sure they got the facts right before they go do something.”

Dykes says Biden’s pick for USTR is Katherine Todd is a student of trade and a leader he thinks will uphold the terms of the USCMA agreement.

“The nominee, Katherine Todd, is a is a student of trade,” says Dykes. “She used to work at USTR on the House Ways and Means, and she will be one who will want to uphold the terms of the agreement.”



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