The Canada-EU Comprehensive Economic and Trade Agreement (CETA), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and the Canada-United States-Mexico Agreement (CUSMA) have allowed for unprecedented access to Canada’s domestic dairy market. These trade agreements provide few export opportunities for Canadian dairy processors and, in the case of CUSMA, even limit the export of certain dairy products.
Without government action, these agreements could have resulted in $300 million in annual losses for Canada’s dairy processing sector.
Government action to address the impacts of trade agreements
DPAC has successfully advocated for government action to address the impacts of these agreements on Canada’s dairy processors. This compensation has included $497.5 million for Canada’s dairy, poultry and egg processing sectors:
- $100 million for a Dairy Processing Investment Fund to address the impacts of CETA (2017)
- $292.5 million to create a Supply Management Processing Investment Fund to address impacts of CETA and CPTPP (2021)
- $105 million added to the Supply Management Processing Investment Fund to address the impacts of CUSMA (2022)
Beyond these investments, the 2023 Federal budget included $333 million for the creation of the Dairy Innovation and Investment Fund to address a structural surplus of solids non-fat (SNF), a byproduct of dairy processing, through support research and the development, market development and processing capacity for products based on SNF.
Addressing impacts of trade agreements will allow dairy processors to more confidently invest and innovate in Canada. Government programs to mitigate the impacts of these trade agreements on Canada’s dairy processors will help to stabilize market disruption and help processors adapt to new market realities created by influx of imported products.
The importance of dairy import permits
Trade agreements like CETA, CPTPP, and CUSMA allow supply managed products, like dairy, to be imported into Canada without duty through permits known as tariff-rate quota (TRQ).
TRQ holders are allowed to import a specific amount of a certain product during a specified period. This means that the Canadian government decides which companies, groups or individuals receive the TRQ each year and then import products with little or no duties.
DPAC’s position is that the vast majority of dairy TRQs should always be allocated to dairy processors. Dairy processors have a proven track record as serious importers, with deep expertise of trends and Canadian consumer preferences.
Allocating TRQ to dairy processors enables Canada to provide additional market access to trading partners while also supporting a robust dairy supply management system. Finding this delicate balance enhances government mitigation measures, maintains the integrity of the Canadian dairy industry and ensures that it continues to thrive.
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September 6, 2023 – The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) dispute settlement panel published its report yesterday on Canada’s administration of its tariff rate quotas (TRQs) on imports of dairy products.
The panel found that Canada’s practice of creating TRQ pools exclusively for processors is inconsistent with Canada’s obligations under the agreement. This mirrors the finding of the CUSMA Panel decision on the same issue in 2021.
Importantly, on the key aspect of eligibility criteria, the Panel found that Canada’s inclusion of additional criteria for eligible applicants for a TRQ allocation falls within the discretion provided to Canada in designing its allocation mechanism, and is therefore consistent with Canada’s CPTPP obligations. DPAC views this as a very important recognition.
Canada will still need to ensure that its TRQ allocation mechanism conforms to the CPTPP Panel’s decision by ensuring that a share (or ‘pool’) of a total TRQ is not reserved exclusively for the use of dairy processors. DPAC will work with the government to identify options to bring its CPTPP allocation mechanisms into compliance.
A joint statement from the Minister of Export Promotion, International Trade and Economic Development and the Minister of Agriculture and Agri-Food is available here.
November 14, 2022 –
The Dairy Processors Association of Canada (DPAC) welcomes the compensation measures for Canada’s dairy processors announced today by the Minister of Agriculture and Agri-Food, the Honourable Marie-Claude Bibeau.
The announcement of $1.6 billion follows the Government’s commitment to “full and fair compensation” to the dairy sector to mitigate the impact of the CUSMA trade agreement.
The $400 million in programs announced for dairy processors, including $100 million in additional money for the existing ‘Supply Management Processing Investment Fund’ and $300 million for a new innovation program, will support dairy processors in their investments to meet consumer demand and adapt to an ever-changing marketplace.
DPAC stresses the importance of developing the parameters of both programs in close collaboration with the industry to meet the specific needs of supply-managed processors.
May 26, 2022 –
The United States has filed a second request for consultation on Canada’s dairy tariff-rate quota (TRQ) allocation mechanism announced earlier this month. The United States Trade Representative claims that Canada continues to restrict dairy in a manner that is inconsistent with the terms of the Canada-United States-Mexico-Agreement (CUSMA).
DPAC shares the government’s view that Canada has met its obligations under CUSMA and that its dairy TRQ allocation mechanisms are compliant with the agreement.
The USTR’s request on May 25 follows Canada’s announcement earlier this month that it had developed a new dairy TRQ allocation mechanism in order to comply with an earlier CUSMA panel decision. In our view, a key outcome of the last panel decision was the acknowledgement that Canada “has significant discretion in designing and implementing its allocation mechanisms.”
As was the case with the USTR’s first CUSMA challenge, DPAC will continue to work collaboratively with the Government of Canada as it defends its ability to implement a TRQ allocation mechanism that balances trade commitments and the stability of its domestic dairy supply management system.
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