Canadian milk exports challenged, defended again

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Published: February 7, 2002

MONTREAL – Government and dairy industry officials predict Canada will

win the latest legal challenge to its dairy export policy, but it will

take time and money.

After losing a December decision by the World Trade Organization, the

United States and New Zealand convinced the WTO to establish another

panel to review whether Canadian dairy exports violate controls on

export subsidies.

“Canada has complained about the endless loop of litigations,” Dairy

Farmers of Canada economist Rick Phillips told the DFC annual policy

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Still, he said Canada and the industry will have to spend the money and

take the time to defend the system all over again.

He said a new panel report is expected near the end of May, with the

inevitable appeal process lasting through summer and into the fall.

“We expect to win again,” he said.

Agriculture minister Lyle Vanclief made the same prediction and

promised government help.

“I assure you the federal government will continue to do everything in

its power to support the industry and we are committed to working with

this industry and provincial governments to defend our export

mechanisms before the WTO compliance panel,” Vanclief said.

“We are not going to back down. We will fight with you and we will

fight vigorously all the way.”

The international fight over the legality of Canada’s dairy export

policy has dragged on for more than three years.

When exports started, they were organized through the supply management

system and special classes were created within the quota system.

The U.S. and New Zealand complained that these bodies were creatures of

government and were therefore exporting at prices cheaper than domestic

prices. They argued that this was effectively an export subsidy,

putting Canada in violation of WTO rules against increasing exports of

subsidized product.

The WTO agreed and Canada was ordered to change the way it exports or

face retaliation.

Canada responded by moving milk boards out of the picture. Farmers who

produced for export started to do so outside the quota system.

The critics said the hand of the marketing boards was still visible and

they complained to the WTO that Canada had not complied with the

ruling. A WTO compliance panel agreed with them last July.

Canada appealed and in December, an appellant panel sided with Canada,

arguing that the compliance panel was flawed.

However, it did not rule on whether Canada was in compliance, noting

only that once the original judgment was overturned as inappropriate,

there was no need to judge Canada’s rules.

Canadian officials proclaimed the long fight over. Trade minister

Pierre Pettigrew said it proved the worth of WTO for a medium-sized

exporter like Canada, which was able to beat a challenge from a giant

like the U.S.

But the Americans and their New Zealand allies were not yet ready to

concede defeat. The trade lawyers are back on the case.

“I didn’t expect to be standing before you this year talking about this

issue again,” Phillips told the convention. “Here I am.”

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