The federal government is vowing to once again defend Canada’s dairy supply management system against a potential American challenge.
Late last week, three American dairy groups asked the United States trade office to again take Canada’s dairy system to international trade court.
They complained that Canada is not meeting its trade treaty obligations by subsidizing milk exports and by refusing to allow bulk imports of American fluid milk.
If the American government decides to launch a challenge before a World Trade Organization disputes panel, Canadian officials say they will defend the industry, as they did successfully last year in the North American Free Trade Agreement panel case.
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“Right now, the department has the allegations from the U.S. industry and will be talking to the Canadian industry and the provinces about them,” said Vern Greenshields, spokesperson for agriculture minister Lyle Vanclief. “If the Americans decide to pursue an investigation, we will defend our position.”
Paul Martin, an international trade specialist with Agriculture Canada, said Canada is honoring all commitments it made in the 1994 General Agreement on Tariffs and Trade.
“Our answer is that our pricing system is fully consistent with our international trade obligations, that we meet our commitments on (import access) and we are ready to make that case to a panel if that is what the U.S. decides,” he said Sept. 8.
The Dairy Farmers of Canada lobby group accused the American dairy industry of using “bullying tactics” as it tries to take Canadian market share with cheaper American products.
In 1996, a NAFTA trade dispute panel ruled unanimously that Canada has the right to apply tariffs to protect its dairy, poultry and egg industries.
“We’ve gone this route before,” Dairy Farmers president Barron Blois said in a statement issued by the farmer lobby in Ottawa. “The U.S. has made unfounded accusations, challenged Canada and lost. We are confident the outcome of this latest challenge will be no different.”
In their petition to Washington, American dairy groups complained that Canada’s special class pricing is effectively an export subsidy program, since export prices are lower than domestic prices and yet farmers receive a blended pooled price which allows higher domestic prices to “subsidize” lower export prices.
Martin said Canadian exports are priced according to the value of the products the milk will be used to produce.
“Usually, export milk is used to make lower-value products and it is natural to price the milk to reflect the market value of the products,” he said.
The Americans also complain that while trade rules require Canada to allow fluid milk in, U.S. dairies are not allowed to sell fluid milk commercially north of the border.
Martin said Canada fulfills its access commitment by allowing 64,500 tonnes or more of milk to come into Canada each year from the U.S. It is brought across the border by Canadian shoppers, rather than by American companies.
