A recent USMCA ruling seems to have put an end to the long-running dispute between the U.S. and Canada over tariffs on dairy imports.
The USMCA dispute panel determined that Canada had not acted unreasonably, and under the U.S.-Mexico-Canada Agreement, Canada has the right to maintain tariff rate quotas (TRQs) on the following 14 types of dairy products: milk, cream, skim milk powder, butter and cream powder, industrial cheeses, cheeses of all types, milk powders, concentrated or condensed milk, yogurt and buttermilk, powdered buttermilk, whey powder, products consisting of natural milk constituents, ice cream and ice cream mixes, and other dairy.
Furthermore, this closes the door on the U.S. issuing retaliatory tariffs on Canada, which is something that had been discussed as a possibility in prior discussions about the issue.
The announcement follows the United States’ request for a dispute settlement panel on January 31, 2023.
The United States has been expressing concerns about Canada’s dairy TRQ allocation measures since prior to entry into force of the USMCA. In December 2021, a USMCA dispute settlement panel found Canada’s dairy TRQ allocation measures to be inconsistent with Canada’s USMCA obligations. In response to the adverse findings of the panel, Canada introduced changes to its TRQ allocation measures, but the United States considered that Canada’s revised policies were still inconsistent with Canada’s obligations under the USMCA.
In May 2022, the United States requested consultations with Canada to address its updated dairy TRQ allocation measures. Following those consultations, Canada ceased its USMCA-inconsistent partial allocation of calendar year 2022 dairy TRQs, which the United States had raised in the May 2022 consultations request.
In December 2022, the United States again requested consultations with Canada after identifying additional areas of concern with Canada’s dairy TRQ policies. The United States established a panel in January 2023. After receiving written submissions and meeting with the disputing parties, the USMCA panel issued its final report on November 10, 2023.
In the report, the panel found that Canada’s measures are not inconsistent with the USMCA provisions cited by the United States. The panel split on the U.S. claims that Canada’s exclusion of retailers, food service operators, and other entities from eligibility and its historical market share approach to allocate Canada’s USMCA dairy TRQs breach Canada’s USMCA obligations. A dissenting panelist agreed with the United States that by excluding retailers and others, Canada was breaching its commitment to make its dairy TRQs available to all applicants active in the Canadian food or agriculture sector.
There is no appeal process for dispute settlements under USMCA.
U.S. Trade Ambassador Katherine Tai said she was “very disappointed” by the panel’s findings, adding that the U.S. would “continue to work to address this issue with Canada, and we will not hesitate to use all available tools to enforce our trade agreements and ensure that U.S. workers, farmers, manufacturers, and exporters receive the full benefits of the USMCA.”
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Following a recent meeting between President Biden and Canadian Prime Minister Justin Trudeau, the US and Canadian governments released a joint statement reaffirming their commitment to a mutually beneficial partnership to support green energy trade initiatives.
Highlights include:
- Introducing enhanced plans to support clean technology manufacturing and adoption.
- Launching a one-year Energy Transformation Task Force to accelerate cooperation on critical clean energy opportunities and supply chains, including securing and strengthening renewable energy and electric vehicle supply chains, critical minerals and rare earths, grid integration and resilience, and nuclear energy.
- Working towards net-zero greenhouse gas emissions by harmonizing charging standards and developing cross-border alternative fuel corridors, and building a network of electrical vehicle fast chargers and community charging options on both sides of the border.
- Proposing regulations before this fall that will reduce greenhouse gas emissions from their respective sectors, which builds on commitments to achieve net-zero power grids by 2035
- Working with other major energy importers and exporters to develop an internationally aligned approach to measurement, monitoring, reporting, and verification for lifecycle methane and CO2 emissions across the fossil energy value chain.
- Work together to promote North American trade of low-emission goods, including green steel and aluminum
- Coordinating efforts to develop secure and reliable North American nuclear fuel supply chains and build broader partnerships with allies and partners, which will help to ensure access to low enriched uranium.
- Strengthening the resilience of critical mineral and semiconductor supply chains and diversifying supply chains that are essential to clean energy, electric vehicles, semiconductors, aerospace, and defense, among other sectors.
- Continuing to impose economic sanctions on Russia due to the ongoing war against Ukraine.
Read Prime Minister Trudeau and President Biden’s full joint statement here.
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The US, along with 11 other countries in North and South America, has launched the Americas Partnership for Economic Prosperity (APEP), a new economic partnership designed to stimulate trade, resilience, competitiveness, shared prosperity, sustainability, and inclusivity among partners countries.
The APEP, “will be a tool to bring more voices to the table, to ensure that people who have been traditionally left out – like women entrepreneurs, indigenous peoples, and other underrepresented groups – can help shape this new chapter in our story on trade,” said United States Representative Katherine Tai.
Tai added that the APEP “is a part of our pursuit of a worker-centered trade policy. It will be a new type of economic arrangement, anchored on cooperation to build our economies from the bottom up and the middle out. That includes empowering workers and eradicating forced labor; strengthening our supply chains to be more resilient against unexpected shocks; fostering innovation in both the public and private sectors; and tackling the climate crisis by growing climate-related industries and creating good-paying jobs throughout our region.”
Quick Facts:
- The creation of APEP was announced by President Joe Biden in June 2022 on the margins of the Summit of the Americas.
- The initial members of APEP are Barbados, Canada, Chile, Colombia, Costa Rica, the Dominican Republic, Ecuador, Mexico, Panama, Peru, the United States and Uruguay.
- President Biden has indicated that the APEP could see further expansion to countries such as Brazil and Argentina.
- All member countries of APEP signed the Joint Declaration on the Americas Partnership for Economic Prosperity.
According to the White House, the APEP will focus on:
- Driving regional competitiveness and building the proper foundation for sustainable, dynamic economic growth and greater investment, including customs procedures, trade facilitation, logistics, good regulatory practices, and non-tariff barriers.
- Leveraging geographic proximity and deep trade ties to strengthen the sustainability and resilience of regional supply chains and grow our small and medium businesses, while protecting workers and the environment.
- Ensuring that all can benefit from shared prosperity in a dynamic economy, including investments in workforce development, labor standards, safety, equity, and promotion of quality jobs; expanding financial inclusion; and improving public services while addressing corruption, tax evasion, and other issues that affect the ability to deliver.
- Working together to bring responsible private investment to regions in order to drive inclusive and sustainable investment.
The White House says it looks forward to advancing this partnership through 2023.
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