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Blood in the water: Ottawa set to face more trade battles after losing US dairy dispute, lawyers say

Trading partners around the world have made no secret of their dissatisfaction with Ottawa’s high tariffs on dairy imports

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Other countries are expected to fight with Canada over its protectionist dairy policies following a loss to the United States in a dispute over cheese imports, international trade lawyers have said.

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Trading partners around the world have made no secret of their dissatisfaction with Ottawa’s high tariffs on dairy imports, a tactic used to shield Canadian farmers from competition under the federal supply management system. . These allies, particularly in Europe and New Zealand, were undoubtedly very attentive last week when the United States won a key decision that could allow more American dairy brands to enter the Canadian retail market.

When you say “dairy” and “Canada” the world laughs

Commercial Lawyer Mark Warner

“When you say ‘dairy’ and ‘Canada’ the world laughs,” said Mark Warner, trade lawyer and former official with the Organization for Economic Co-operation and Development (OECD). “Canadians are going to have to say, ‘Um, it’s not just the Americans who have a problem with us. These are in fact all of our trading partners. “

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The United States accuses Canada of playing tricks to mitigate the impact of its commitments under the United States-Mexico-Canada Agreement (USCMA), the pact that replaced the Northern Free Trade Agreement -american in 2020. In the new treaty, Ottawa agreed to expand the so-called tariff rate quotas, which allow a limited volume of American dairy products to enter Canada without the regular tariffs.

American farmers have announced the increase in duty-free quotas in the new North American trade agreement as a victory in their long struggle against supply management. But soon they complained again, as the American dairy products that Canadians were bringing across the border were mostly of low value – mass-produced slabs of mozzarella for frozen pizzas, rather than fine goat from herds of Vermont goats.

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That’s because Canada has chosen to give the vast majority of USMCA quotas to domestic processors – the dairy companies behind Canada’s biggest brands of milk, cheese and yogurt – who are more inclined to import. commercial quantities of cheap cheese, then slice it, grate it and sell it for a premium in grocery stores.

“We basically agreed on limited market access, and then we said, ‘We’ll hand it over to your competition,’” Warner said. “It’s very cynical, isn’t it?” “

In the USMCA dispute settlement panel, Canada argued that its practice of distributing duty-free quotas had “never been in contradiction” with its other free trade agreements, including Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union and the Trans-Pacific Partnership (TPP), which links Canada to a group of Asian and Latin American economies.

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However, this argument could ultimately backfire. As the Panel pointed out, Canada’s behavior “has apparently not been challenged” under the TPP or CETA. The USMCA’s decision could become a model for litigation elsewhere, said Nicolas Lamp, a former dispute resolution lawyer at the World Trade Organization who now teaches commercial law at Queen’s University.

“Canada’s trading partners could even use this report to say, ‘Look, if that wasn’t acceptable under the USMCA, it’s clearly not acceptable under the CPTPP either,” he said. .

The European Union called for a review of Canada’s TRQ allocation system under CETA in 2019. Last year Canada held consultations on its TRQ system, but this process is “underway. stalled, ”according to a recent Twitter message from Meredith Lilly, an associate professor of commerce at Carleton University who served as a business advisor to former Prime Minister Stephen Harper.

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The USMCA decision gives Canada until February to propose a method of distributing quotas that does not exclusively favor national dairy companies.

US Deputy Trade Representative Jayme White insisted on the issue during a meeting with his Canadian counterpart on Wednesday, where he “underscored the importance for Canada to fully meet its commitments with the USMCA,” according to a report. reading the call. A spokesperson for Trade Minister Mary Ng said last week that Canada “will continue to work closely with the dairy industry to develop” the new quota system. And on Wednesday, trade tensions continued as Ng announced that Canada would join Mexico as a plaintiff against the United States in a new USMCA panel that will examine the cross-border flow of auto parts.

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Warner, director of Toronto-based Maaw Law, said the dairy panel’s decision will not prompt Canada to “abandon” its position in the multi-year feud. Canada is more likely to ‘dance’ and make a minor change to its quota system, the Americans will issue another challenge, and the series of legal battles will continue.

“I mean at some point Canada will look stupid in the global community,” he said. “But to be quite honest, after working at the OECD and being around these discussions at the WTO, Canada already looks dumb on dairy.”

• Email: jedmiston@nationalpost.com | Twitter:

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