The battle over Canada’s controversial dairy export policy is about to become more serious as the United States and New Zealand move toward imposing broader trade sanctions.
On March 1, the two countries go before a World Trade Organization dispute settlement panel to complain that Canada has not complied with an earlier WTO ruling that its dairy export policy is an illegal subsidy.
They will ask for the right to punish Canada by imposing trade sanctions worth up to $100 million on items as diverse as meat products, cereal products, fruit and vegetables, sugar products and oilseeds.
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Canada said the trade challenge is unjustified and will be fought.
Retaliation is not imminent, even if the challenge is successful.
“Retaliation would only be possible if Canada is found noncompliant with its WTO obligations,” said agriculture minister Lyle Vanclief. “The government of Canada, provincial governments and the dairy industry have worked together on measures we believe bring us into compliance and we will vigorously defend them.”
The problem stems from a dairy industry move beyond its concentration on the domestic market to develop an export niche. The first version involved a plan by provincial marketing boards to create a special class of milk destined for the lower-priced export market.
The WTO ruled that was effectively a subsidy, compensating for export losses through high domestic prices.
Provincial boards and the national system responded by creating export systems they said were divorced from domestic or provincial marketing board control. The U.S. and New Zealand disputed how much the new system is free of state interference.
Canada’s trade minister Pierre Pettigrew said last week Canada has met its requirements under trade law.
“We are confident Canada has met its WTO obligations for dairy.”
