Biden administration launches trade dispute against Canadian dairy industry

The Biden administration launched a trade dispute against Canada’s dairy industry on Tuesday, triggering for the first time the new U.S.-Mexico-Canada Agreement’s (USMCA) mechanism to review such complaints.

U.S. Trade Representative Katherine Tai said the administration has requested a dispute settlement panel to review Canadian measures the U.S. says limit the ability of American dairy exporters to sell products to consumers north of the border. The USMCA, which took effect in July, included language to expand access for U.S. dairy farmers and processors to Canada’s domestic dairy market.

“A top priority for the Biden-Harris Administration is fully enforcing the USMCA and ensuring that it benefits American workers,” Tai said in a statement. “Launching the first panel request under the agreement will ensure our dairy industry and its workers can seize new opportunities under the USMCA to market and sell U.S. products to Canadian consumers.”

The U.S. dairy industry has long voiced concerns over what it says are obstacles to getting its products to Canadian consumers, with many complaints centering around tariff-rate quotas that allocate a segment of the dairy market solely for Canadian dairy processors.

The issue was also discussed during the Trump administration, and Washington and Ottawa were never able to resolve the issue. Tai noted the two sides held talks in December over the issue but failed to make progress.

The request for a formal dispute settlement panel marks an escalation in the disagreement.

The body would meet before issuing a report later in 2021. Canada would be forced to change its practices to come into compliance with the USMCA if the U.S. prevails, and Washington could then impose tariffs if Canada fails to take appropriate action. 

The Biden administration has already taken a number of steps to ensure USMCA enforcement, including reviewing a union vote at a General Motors factory and filing a complaint with Mexican labor groups against a Mexican auto parts company.

Rep. Kevin Brady (Texas), the top Republican on the House Ways and Means Committee, praised Tai’s announcement Tuesday. 

“Ambassador Tai is right to use USMCA’s powerful new enforcement mechanism to hold Canada accountable for unfair treatment of U.S. dairy products. Amidst a number of concerning USMCA implementation issues, including in Mexico’s energy and agricultural sectors, we must not hesitate to stand up for the rights of American farmers, workers, families, and businesses,” Brady said in a statement. “I urge the Administration to fully enforce all aspects of the agreement in order to maintain the strong bipartisan support that it enjoys.” 

Canada, meanwhile, maintained that its practices are in line with its obligations under the USMCA.

“Canada is disappointed that the United States has requested a dispute settlement panel,” Canadian Trade Minister Mary Ng said in a statement.

“We are confident that our policies are in full compliance with our…obligations, and we will vigorously defend our position during the dispute settlement process,” Ng added. “Our government will continue to stand up for Canada’s dairy industry, farmers and workers and will continue to preserve, protect and defend our supply management system.”