HALIFAX, N.S. – The attempt by Canada’s dairy industry to develop an
export business while protecting most of the Canadian domestic market
from imports was dealt another blow last week when the World Trade
Organization ruled once again that Canadian dairy exports are illegally
subsidized.
While New Zealand and the United States hailed the decision as a
vindication of their four-year WTO challenge, Canada immediately
announced it will continue the fight.
“We will be appealing it,” agriculture minister Lyle Vanclief said June
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26 at a news conference in Halifax. “We do not agree with it. We have
removed government from those decisions on selling into an export
market. That is made between a producer and processor. We will be
appealing it. We have good grounds.”
The WTO trade panel ruled otherwise.
It agreed that Canadian milk sold to processors for export at prices
far below the fixed domestic price is subsidized by the fact that the
government-regulated domestic system exists and keeps the industry
afloat.
The panel said that Canada is exceeding its export subsidy limit.
If the ruling is upheld on appeal, Canada could be hit with trade
sanctions worth as much as $70 million.
Canadian officials say approximately $200 million in export sales are
at issue.
In Auckland, N.Z., trade negotiations minister Jim Sutton said he hoped
Canada would reflect closely on this result and forego any appeal.
“While there is a right of appeal, today’s decision represents the
fifth occasion on which Canada has been unable to demonstrate that its
dairy export pricing regime complies with WTO subsidies disciplines,”
he said in a statement distributed by the New Zealand High Commission
in Ottawa.
“I would hope that Canada will realize this time that the writing is on
the wall and withdraw this illegal support to its exporters.”
Sutton said Canada’s cheap dairy product exports depress world prices
and cost New Zealand farmers up to $80 million annually.
The case started in 1998 when the United States and New Zealand joined
to complain about Canada’s attempts to build an export business. In the
export policy’s first incarnation, provincial dairy boards were
responsible for giving farmers the right to produce outside the
domestic supply for export.
In 1999, the WTO ruled that it amounted to an export subsidy because
farmers used profits from domestic regulated markets to underwrite
export sales made at a loss.
In response, Canada changed its system to exclude marketing boards from
the export business. Farmers who want to sell milk for conversion into
low-priced export products make a deal with processors and do that part
of their business outside the quota system.
The U.S. and New Zealand complained that the changes were not
sufficient.
They won at a trade disputes panel a year ago but last December, a WTO
appeals panel overturned the judgment and ruled that the critics had
not proven their case. However, it did not explicitly say the Canadian
system was trade legal.
