The U.S. — Canada, will have to stop putting tariffs on U.S. dairy products because of a major decision made Tuesday. This could allow American dairy farmers to sell more than $200 million worth of dairy products to Canada each year.
The first time the new dispute resolution panel was used was when it was used for the first time. Because of the 2020 pact, the U.S. said that Canada used complicated tariff-rate rules to keep some of the dairy market for Canadian dairy processors.
This is an important victory for U.S. dairy farmers, said Jim Mulhern, the president of the American Dairy Association.
The head of the National Milk Producers Federation is: “The United States and Canada agreed on a set of rules for how dairy products could be sold in each other’s countries. Instead of following those rules, Canada broke them.”
Canada didn’t say what it would do, but it said that the Feb. 3 deadline to solve the problem was important. They said that in a joint statement, Canada’s ministers of trade and agriculture said that they “continue to stand up for its dairy industry.” They said that farmers and workers and the communities they support are still important to them.
If Canada doesn’t meet the deadline, the U.S. could start the process of putting tariffs or other things in place to fight back.
Even though Canada said that some parts of the ruling were in its favour, the panel’s report only found that Canada’s practises were not in line with its obligations in the trade deal.
The current administration has said that it doesn’t think trade agreements work and hasn’t started any new talks. “This is a big deal because it gives credibility to a recent trade agreement at a time when the current administration has said that trade agreements don’t work and hasn’t started any new talks.”
The Trump administration made its first complaint about Canada’s dairy quotas in December 2020, which led to talks between the two countries but no resolution.
Because of this, the USMCA dispute resolution process started for the first time in May, 2021, when that complaint went up a notch and the US raised it. Elbio Rosselli led the three-person panel that tried to settle the dispute.
Under rules set up by the USMCA, a diplomat from Uruguay is on the panel. He or she must be independent and have a lot of knowledge about international law and trade treaties.
It was left out of 1994’s North American Free Trade Agreement, which was the precursor to the USMCA. Canadian dairy didn’t make the cut.
In a statement, U.S. Trade Representative Katherine Tai said that this “historic victory” will help end unfair trade restrictions on American dairy products and make it easier for the US dairy industry and workers to sell their products to Canadians, and that the USMCA will allow them to do so, too.
House Ways and Means Committee GOP leader Kevin Brady, from Texas, praised the USTR. The USTR is in charge of trade deals.
USMCA’s new enforcement mechanism was used by the US Trade Representative to get this important result, he said. The Canadian government must now do the right thing and fully comply with its dairy rules.
Canada’s dairy farmers have been fighting for a long time to keep their market closed to the rest of the world. The country has about 11,000 commercial farms that have a lot of power because they are in a politically important area: rural central Canada, especially in French-speaking Quebec.
As a way to keep those things in mind, Canada uses what it calls supply management. Supporters say that the system helps keep prices and domestic capacity stable for a food that is important for health.
U.S. dairy subsidies and regulations have also been used for a long time to keep the price of milk stable in the U.S. When the U.S. and Canada came to a deal on a trade deal, dairy was one of the most difficult things to talk about.
The U.S. industry has long said that Canada’s practises go too far, and almost right away after the USMCA came into effect, they said that Canada was breaking the deal, which is what the USMCA is for.
After Mexico, Canada is usually the second-largest market for U.S. dairy exports, even though there are restrictions in place. This could be a good thing for U.S. dairy producers if Canada’s market opens up even more. According to the International Trade Commission, if the USMCA were to be put into place as it was negotiated, it would boost U.S. dairy exports to Canada by $227 million.
As a result of the USMCA, dairy exports to Canada have risen by $56 million. This is based on data from Trade Data Monitor, which tracks global import and export data.
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