REGINA — Reciprocal tariffs wouldn’t have much effect on Canada’s supply managed products, according to a Canadian economist, because they can already move between the two countries under tariff-free quotas.
Earlier this month, U.S. president Donald Trump said reciprocal tariffs would “bring back fairness and prosperity to the distorted international trade system and stop Americans from being taken advantage of,” according to a White House fact sheet.
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He has often had Canada’s supply managed system, particularly dairy, in his crosshairs.
Al Mussell, research lead at Agri-Food Economic Systems in Ontario, said under both the World Trade Organization agreement and the Canada-United States-Mexico Agreement (CUSMA), most goods move within the zero tariff quotas.
“Over-quota tariff is quite high, but both the U.S. and Canada have very high over-quota tariffs,” he said.
“They’re designed to be prohibitive.”
Both countries moved to the TRQ system after the Uruguay Round WTO Agreement on Agriculture in the 1990s. Until then, they used a system of binding import quotas, under which they could import only to a certain amount and then stopped.
Mussell said the two countries established high over-quota tariffs to protect their industries, but very little trade occurs over quota anyway.
The higher cost of production in Canada means exports are limited on price alone, he said.
Mussell said the U.S. system of tariffs and quotas for dairy is quite complicated compared to Canada’s.
The U.S. also has the Pasteurized Milk Ordinance, which is a non-tariff barrier that requires certain products to be made only with U.S. Grade A milk. A version of that requirement has been around for more than 100 years.
Canadian processors could make products for the U.S. export market if they had a facility inspected to the Grade A standard. Then, they could use the import for re-export program and bring in U.S. milk, process it and return the products. Mussell said some of that occurs, but not much.
The Americans, meanwhile, have taken Canada to trade dispute settlement panels for limiting access to the Canadian market. Under CUSMA, Canada agreed to open 3.5 percent of its market to American products. Canada lost the first round but won the second.
The irritant will be an issue again when CUSMA is reviewed next year.
Mussell added reciprocal tariffs could be a bigger deal for the European Union because it doesn’t have a trade agreement with the U.S.
