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Wisconsin dairy groups say new trade dispute could lead to more serious action against Canada over dairy policy

US Trade representative is challenging Canada's policy that officials say limits export opportunities for American dairy processors

U.S. Trade Representative Katherine Tai, center, tours the Servais family’s dairy farm in Stoddard, Wis. on Friday, July 16, 2021. Hope Kirwan/WPR

Some Wisconsin dairy groups are applauding a move by the federal government to challenge Canada’s dairy import system for a second time.

U.S. Trade Representative Katherine Tai announced her office has established a dispute settlement panel under the U.S.-Mexico-Canada Agreement, or USMCA.

This is the second time the United States has challenged Canada’s tariff-rate quota system, which allows a certain amount of products to be imported at a lower tax rate. When USMCA was established, the system was seen as a way for U.S. producers to increase exports of milk powder, butter, cheese and other products into Canada, which limits imports in order to protect their federal dairy supply management system.

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A previous dispute panel found in December 2021 that the tariff-rate quota system did not follow Canada’s obligations under USMCA and Canada made changes to the policy. But Tai said in a press release that the revised system still limits retailers, food service operators and other types of importers from buying American products at the lower tariff rate.

Earlier this week, Democratic U.S. Sen. Tammy Baldwin sent a letter to Tai in support of another dispute settlement panel. In the letter, Baldwin said the previous panel’s ruling should have prompted Canada to change their policy.

“This precedent raises broader concerns about the anticipated effectiveness of the dispute settlement mechanism overall — with implications beyond this specific dairy issue,” Baldwin said in the letter.

Mykel Bickham is director of government affairs for Edge Dairy Farmer Cooperative based in Green Bay. She said the trade dispute matters to Wisconsin dairy producers and manufacturers because trade officials estimated the U.S. dairy industry would see an increase in exports under the new agreement.

We were supposed to see an additional $277 million in dairy products go to Canada as part of this agreement, but because of the barriers they put into place, we have not seen that additional increase,” Bickham said.

She said Canada is an important export market and is consistently one of the top three buyers of American dairy.

But during the previous dispute over the tariff-rate quota system, the Wisconsin Farmers Union called for dropping the challenge, saying the policy change would do little to help family farmers in Wisconsin and the U.S. but would hurt their counterparts in Canada.

Given the continued fight between the U.S. and Canada over dairy exports, Bickham said her organization and others in the dairy industry aren’t expecting Canada to change their policies because of another dispute panel. But she said it’s important for the U.S. to go through the dispute process before moving to more serious action, which could include retaliatory tariffs. Several national dairy groups called for the tariffs in May and industry publication Agri-Pulse reported that U.S. Agriculture Secretary Tom Vilsack did not rule out the possibility when asked about the issue.

“While we do not want to escalate this, we want to give Canada as many opportunities as possible to come into compliance,” Bickham said.