USMCA: Washington Launches a Procedure against Canada over Dairy Products Dispute
The USMCA agreement between the US, Mexico, and Canada has revealed some areas where the new allies disagree, particularly with the US' recent decision to initiate a procedure against Canada. Come read our blog to learn more.
In order to compete on a global scale, the United States, Mexico, and Canada have signed the USMCA agreement in July 2020. However, the implementation of this trade agreement has revealed some areas where the new allies differ.
Dairy Products: The Bone of Contention
Washington launched the first dispute resolution procedure a year ago, just a few months after the new trade treaty between the US, Canada, and Mexico entered into force. The Canadian milk quotas were in their sights. However, according to the US Trade Representative, much of that quota has been allocated to processors rather than producers, effectively depriving American farmers of their fair share of the supply-managed Canadian market. As for Canada, the message from the trade authorities was quite different. Canada insisted that the allocations were fully consistent with its commitments under the trade agreement, which went into effect in July 2020. Canada also expressed "disappointment" with the decision of its "closest trade partner."
The US initiated the formation of a special settlement group, as required by the treaty's procedure, and this group issued its conclusions on December 20th, which were made public. The Canadian quotas, according to the group, were in violation of the USMCA. Katherine Tai, US Trade Representative (USTR), hailed the agreement as a "historic victory."
A Short-Lived Hope
In May 2022, Canada published its new quota policy regarding dairy products. However, this announcement did not take into account the settlement group's conclusions, which were published in December of last year. The US thus expressed disappointment and provided little information about the potential consequences of the events in a statement issued the same day by the Office of the USTR. And, as a result of the events, the US has filed a new complaint against Canadian quotas.
This dispute between the US and Canada will serve as a litmus test for the strength of this new cooperation agreement. The resolution of this dispute will have an impact on the continuation of trade relations between the three countries since the US and Canada have also filed a complaint against Mexico over energy quotas.
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