The United States and New Zealand have withdrawn their threat of retaliation against Canada over subsidized dairy exports.
They told the World Trade Organization they are content that Canada is complying with a WTO ruling against the dairy export program.
It ends more than four years of costly fights before WTO panels and, for the moment, settles the issue.
“It is good to have this behind us,” said Dairy Farmers of Canada executive secretary Richard Doyle in a May 12 interview. “It brings back stability and takes away a crisis feeling that hung over the industry.”
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Steve Verheul, Canada’s chief agriculture negotiator, said it is a relief to see the dispute end. The threat of retaliation against Canadian products other than dairy had the potential to create divisions among farm sectors.
“It’s good to get the threat of retaliation over,” he said May 12.
The two countries were threatening trade retaliation worth more than $100 million against Canadian products if the dairy export program organized outside the quota system was not shut down.
In the wake of the WTO ruling against Canada, provincial milk marketing agencies are insisting all milk flow through the regulated system. The WTO ruled that a high price domestic market allows farmers to effectively cross-subsidize cheaper exports.
Only in Ontario is there resistance to reregulating exports. A small group of producers are appealing the decision and want to produce milk outside the quota system for export. The issue may not be resolved for months.
That leaves government and industry wondering if the issue really is resolved.
Both Doyle and Verheul said a decision by an Ontario tribunal to allow farmers without quota to produce for export likely would lead to another WTO case against Canada.
“If the non-quota holders win, then I think we’ll be back before a panel defending ourselves again,” said Doyle.
Verheul agreed. He said the letter to the WTO was clear that New Zealand and the U.S. expect Canada to keep unregulated milk production out of the export market after May 1.
In a statement, New Zealand trade minister Jim Sutton hailed the end of the dispute as a victory for a rules-based trading system. Canada has “taken prompt steps to abolish the illegal program and given an undertaking that it would keep to its export subsidy commitments in future.”
Verheul said the decision it means the value of dairy exports will fall from $400 million reached at the peak of the export program to the $150 million range.
