Both Canadian and U.S. officials claimed victory in the first-ever trade dispute adjudicated under terms of the two-year-old Canada U.S. Mexico trade agreement (CUSMA) over U.S. complaints about Canadian dairy import practices under the new deal.
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Source: AgWeb

Both claims cite ruling details but how can both be true? On the one hand, the three-person panel’s findings, released Jan. 4, agree with a U.S. complaint about Canada’s method for managing new import access for U.S. dairy products.

Canada’s system has relied on Canadian processors to import American dairy products. That method doesn’t work, however, for American trade negotiators.

Neither does it work for the appeal tribunal headed by Uruguayan diplomat Elbio Rosselli and two international lawyers, Julie Bédard and Mark C. Hansen.

On the other hand, the panel’s 50-page decision leaves it basically to Canadian officials to find another method for assigning import quota to solve the Americans’ problem.

Even so, the panelists also confirmed that Canada has significant discretion in methods for allocating import access of farm products under its long-standing supply management system.

Such murkiness should become clearer by Feb. 5. That’s the panel’s deadline for Canadian officials either to sort it out with the Americans or face possible U.S. retaliation.

A Jan. 4 statement by U.S. Trade Representative Katherine Tai says the U.S. “has prevailed” in the first-ever dispute under the U.S.-Mexico-Canada Agreement (USMCA).

Also on Jan. 4, a joint statement from Canada’s Minister of International Trade Mary Ng and Agriculture Minister Marie-Claude Bibeau expressed pleasure with CUSMA panel findings “which ruled overwhelmingly in favour of Canada and its dairy industry.” The ruling confirms that Canada can manage dairy imports “in a manner that supports Canada’s supply management system,” the Ng-Bibeau statement said.

You will have noticed by now that the U.S. and Canadian governments refer differently to this trade agreement negotiated at the insistence of Donald Trump under his former presidential administration. In Canada, it’s CUSMA; in the U.S. it’s USMCA.

In Mexico, the title of the agreement which replaced the North American Free Trade Agreement (NAFTA) is Tratado entre Mexico, Los Estados Unidos y Canada, T-Mec for short. Mexico was not part of the dairy dispute.

However, the panel did receive a written submission from the Ottawa-based International Cheese Council of Canada (ICCC) which is a departure from litigation under NAFTA with participation only by government signatories.

The panel’s written decision made no reference to cheese council submissions. However, published analysis by Calgary-based law firm, Bennett-Jones, says third-party involvement is a significant change in trade practice from NAFTA days.

Bennett-Jones lawyers also identified the dairy case as proof that procedures under CUSMA provide a “reliable and efficient means of resolving disputes.” We’ll see about that more precisely as the Feb. 5 deadline rolls around.

Canada’s reliance on processors to import U.S. dairy products skews toward lower-value  products such as powder, concentrates and large-block cheeses. That tends to support processing activity in Canada, the Bennett-Jones opinion letter says.

A statement from the International Cheese Council, a 45-year-old organization of Canadian importers seeking new U.S. business under CUSMA, estimates the existing processor imports system shorted allowable market access by about 32 per cent during its second year in operation.

What’s at stake here is additional sales of U.S. dairy products in Canada that some estimates put in the value range of $200 million annually. A report on the website estimates U.S. dairy exports to Canada for the first 10 months of 2021 at $478 million, up $56 million since the new treaty took effect.

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