Canada is once again going before the World Trade Organization to
insist that the dairy industry’s export scheme is not a disguised
subsidy and is legal under world trade rules.
Federal trade minister Pierre Pettigrew announced Sept. 23 Canada will
appeal a ruling made in July by the WTO that Canadian exports benefit
from an illegal export subsidy.
Agriculture minister Lyle Vanclief predicted a victory and an end to
the almost five-year challenge of Canadian exports by the United States
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and New Zealand.
“With our appeal, we hope to lay this dispute to rest once and for all,
allowing our dairy sector to focus on creating the world-leading dairy
products it is known for,” he said.
Canada’s dairy farmer lobby is solidly behind the government appeal. It
said the issue is as much the principle as it is the relatively small
revenue generated by exports compared to the multibillion dollar
domestic market.
“We’re confident that a lot of work has gone into this and that the
case is strong,” Dairy Farmers of Canada representative Therese
Beaulieu said Sept. 27. “It is really more the principle. We do not
believe there are subsidies in the dairy industry. We need some clear
WTO definition of what an export subsidy is.”
The dispute goes back to the mid-1990s when Canada’s dairy industry
decided to move beyond the domestic market, where its dominance is
guaranteed by supply management protections. A special class was
created within the quota system that allowed producers to sell to
processors at world-competitive prices that would enable Canadian
products to compete in the U.S. market.
Export class prices were far below domestic prices and the price levels
set by a cost-based formula.
In March 1998, New Zealand and the U.S. took Canada to the WTO,
alleging that cheap exports were being cross-subsidized by protected
domestic incomes, orchestrated by government-mandated marketing boards.
In 1999, the WTO agreed and Canada changed its system to remove the
marketing boards from the process, to move export milk out of the quota
system and to make it a contract between a farmer and a processor.
New Zealand and the U.S. went back to the WTO, insisting that the
shadow of the government-regulated high-price system still was being
cast over exports and therefore an export subsidy still was in place.
Last July, a WTO panel agreed. Critics suggested a protected domestic
market and an export policy are incompatible under WTO rules.
Canada, the provinces and the industry disagree and decided to appeal.
A decision is expected later this year.
