The Canadian dairy industry will soon take on a new front in its ongoing struggle to maintain its supply management system in the face of international trade challenges.
New Zealand Trade and Export Growth Minister Damien O’Connor announced on Thursday that his government had begun a dispute settlement process under the Comprehensive Trans-Pacific Partnership (CPTPP). This is the first time that consultations have been launched between the eight signatories of a trade bloc in the Pacific region.
The CPTPP entered into force in late 2018, with six of its original members being Canada and New Zealand. New Zealand is an aggressive global exporter of dairy products, which is at odds with Canada’s relatively closed domestic market, both during the initial negotiations and during the transaction.
“Our priority is to ensure that New Zealand exporters have substantial access to the benefits negotiated under the CPTPP, that all parties comply with their obligations under the agreement,” O’Connor said in a statement.
“New Zealand’s relations with Canada are ‘excellent,'” the minister said.
“Sometimes even good friends disagree, which is why free trade agreements have dispute resolution mechanisms, such as the CPTPP, to provide a neutral forum for resolving such disputes when they arise,” O’Connor said.
Canada was notified on Thursday, the New Zealand government said in a statement. Canada has seven days to respond, after which the two countries will begin formal consultations. If they do not resolve their differences, New Zealand may request a dispute resolution commission. in accordance with the provisions of Chapter 28 of the Agreement.
The office of the Minister of International Trade, Mary Ng, did not immediately respond to a request for comment from CBC News.
Among the recent disputes
This is not the first time that Canada’s dairy import control system has been targeted by trading partners and criticized as unfairly defensive. Similar problems It emerged from the Comprehensive Economic and Trade Agreement with the European Union that no formal arbitration has been required so far.
To stabilize domestic prices, the federal government imposes prohibitive high tariffs to maintain a stable national supply of cow’s milk and other processed dairy products to prevent any imports below the minimum level required by the World Trade Organization; trade agreements negotiated with specific partners.
The CPTPP has guaranteed member states access to a certain amount of duty-free access to the Canadian market for 20 different categories of dairy, eggs and poultry, all of which are part of Canada’s supply management system.
Companies interested in importing these goods duty-free should apply to Global Affairs Canada for a share of the specific product annual quota. The final decision on who will have how many quotas for the given year will be left to the Minister of Commerce.
Less than one month after the CPTPP takes effect announced the Liberal government It will provide 80 to 90 percent of import licenses to local dairy processors, and a much smaller portion will be available to dairy distributors. Grocery retailers, enterprises that directly import and sell food to consumers, have been completely shut down.
For the Canadian dairy sector, it was a form of compensation for the market share they had to lose to foreign competitors. Those who are already active in the market, say industry speakers, would know best what additional foreign imports could fill market gaps for consumers.
Retailers, not to mention foreign producers, were rude, pointing out that domestic processors have no incentive to import competing products with their own. They warned that Canada might not import as many foreign dairy products as stipulated in the agreement, and that the federal government had set rules to prevent importers from applying, but then not fully exercise their right to import duty-free.
Replenishment rates offer unused quotas
Import data from the Global Affairs website show that New Zealand may be concerned was founded, at least for some products. That Canada was close to importing the full quota of butter negotiated under the CPTPP last year, but the data: cheese և: other products to show a much bigger gap between what was bargained around the negotiating table “what was done on the border”.
The figures do not specify how many of those imports came from New Zealand. Decisions on what to import from which CPTPP countries are the holder of the import license. The other major exporter of dairy products is Australia, one of the current partners of CPTPP.
The quota for CPTPP partners precedes the US withdrawal from the agreement after the election of former US President Donald Trump and the subsequent negotiations on the North American Free Trade Agreement (NAFTA), in which the US also successfully negotiated additional. Free access to the Canadian dairy market in a long list of product categories.
After the departure of the Americans, not all categories of CPTPP, including fresh produce, remained practical և for competing manufacturers, who were further away, especially after international shipments were hit by the COVID-19 epidemic են remain significantly more expensive than that supply chains continue. Tensions have risen amid geopolitical turmoil, such as the Ukraine war.
The United Kingdom is in the early stages of negotiating future accession to the CPTPP. Depending on how the merger negotiations go, the UK may be competing for this market share in the future.
Thursday’s challenge shows that New Zealand has not forgotten its grievances. And he can see a new impetus for his side of the dispute by following it Decision of the Commission established by the Canada-US-Mexico AgreementCUSMA, the successor to NAFTA, which found that the Canadian administration’s similar import licenses were not in line with what the Americans thought they had signed when NAFTA was being revised.
in early March Canada has announced changes to its CUSMA quota distribution policy, eliminating the CPU-only pool. However, the decision of the CUSMA board retained the right to make the final decision of the Minister of Commerce. The final consequences of these changes remain unclear.
The United States, in turn, still sounds skeptical.
During a visit to Ottawa last week, US Trade Representative Catherine Thai called the problems of access to the Canadian dairy market “a source of great disappointment“While he’s still ‘talking’, they are revealing the details of how we can make some progress,” Thai said.
More compensation is coming
The Canadian dairy industry remains bitter as it has had to deal a number of blows to its market in order for Canada to enter into a number of further trade deals under the Liberals. They demanded compensation from Canadian taxpayers for taking these blows for the team.
In addition to import licenses, Canadian farmers receive up to $ 1.75 billion in direct payments during both the CPTPP and Canada’s first four years of a trade agreement with the European Union. For example, the owner of a farm with 80 dairy cows was paid about $ 38,000 a year.
The federal budget for 2021 also set up a $ 292.5 million investment fund for in-house dairy processors to help them compete.
Finance Minister Christia Freeland said in her spring budget that her department would include additional domestic dairy compensation for the losses attributed to CUSMA in the next fall economic statement.
Matthew Frigon, president of the Canadian Dairy Processors Association, told CBC News that he was aware of New Zealand’s request for advice and that his organization was committed to working with the federal government to “protect our ability to design and apply tariff quotas”. Allocation mechanisms that meet its trade obligations and support its domestic production. ”
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