New Zealand has launched a trade dispute against Canada over dairy, saying Canada is breaking the rules of the Comprehensive and Progressive Trans-Pacific Partnership.
Damien O’Connor, New Zealand’s trade minister, announced the CPTPP dispute May 12.
“New Zealand has notified Canada and other CPTPP parties that we believe Canada’s implementation of its dairy TRQs (tariff rate quotas) goes against the rules of the (trade deal),” he said in a New Zealand government news release.
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“CPTPP sets high standards for all parties and it is important these standards are maintained to ensure that our exporters can benefit from the agreement in a way that is fair and commercially meaningful.”
The release noted this action over Canadian dairy is the first dispute “taken by any party under the CPTPP.”
The CPTPP, often called the TPP, is a free trade agreement between Canada, Australia, New Zealand, Japan, Malaysia, Vietnam, Peru, Singapore, Mexico, Brunei and Chile.
The Canadian government has until May 19 to respond to New Zealand’s request. The two countries can then hold consultations to resolve the dispute. If that fails, New Zealand can request a panel to resolve the matter.
Under the CPTPP, Canada provides quotas for import of butter, cream, milk, milk powder and other dairy products from TPP nations. New Zealand’s dairy industry says imports from TPP countries are filling a tiny fraction of the quotas.
“The administration system Canada has put in place for these quotas has seen the right to import primarily given to domestic (Canadian) processors who are direct competitors to New Zealand exporters of those products,” the Dairy Companies Association of New Zealand said.
“This has resulted in pitifully low quota fill rates averaging just eight percent in the latest quota year.”
Canadian import data verifies that the CPTPP quotas are largely unfilled, except for butter. From Aug 1, 2020, to July 31, 2021:
• Butter quota, 2.25 million kilograms. Imports, 2.06 million kg
• Cream quota, 530,000 kg. Imports, 121,000 kg
• Milk, 25 million kg. Imports, zero
• Milk powder, 1.02 million kg. Imports, 95,000 kg
• Skim milk powder, 3.75 million kg. Imports, 25 kg
“Canada has adopted an approach to administering CPTPP quotas, which breaks the rules of the agreement and has severely restricted (market access),” said Malcolm Bailey, Dairy Companies Association chair.
Canada’s ministry of International Trade took issue with New Zealand’s claims, telling the National Post that “Canada is a fair trading partner.”
“Our government will always stand up for Canada’s dairy industry, farmers and our supply management system. We have consistently said we will work with industry and with New Zealand on this issue, and we will continue to do so.”
New Zealand said its dairy industry has lost $68 million in exports, over two years, because its companies cannot access the Canadian market. Unless something changes those losses will persist and expand, since Canada’s CPTPP quotas for dairy imports increase in the future.
“We have appreciated Canada’s engagement on this issue at different levels over a number of years and these proceedings will not come as any surprise to them,” O’Connor said.
“Occasionally even good friends disagree…. It’s for that reason dispute settlement mechanisms in free trade agreements such as CPTPP exist.”
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