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Dairy cows leave the barn after being milked at a farm in Granby, Que., July 26, 2015.CHRISTINNE MUSCHI/REUTERS

Canada is facing a trade dispute from New Zealand over dairy imports, in what experts say will be an uphill battle for a government already beleaguered by accusations of failing to meet trade obligations.

In a statement last week, New Zealand Trade Minister Damien O’Connor said Canada’s implementation of dairy imports has been “inconsistent with its obligations” under the Comprehensive and Progressive Trans-Pacific Partnership agreement, or CPTPP. United States launched a similar complaint against Canada last year – a dispute that ultimately found Canada in violation of its agreements.

“CPTPP sets high standards for all parties,” Mr. O’Connor wrote in his statement. “And it is important these standards are maintained to ensure that our exporters can benefit from the agreement in a way that is fair and commercially meaningful.”

As part of the 2018 agreement, Canada agreed to allow trading partners tariff-free access to Canada’s market for a small amount of imported dairy. But much of the quota for importing product was allocated to Canadian dairy companies, which have subsequently left much of that quota unfilled.

According to the Dairy Companies Association of New Zealand, or DCANZ, just 8 per cent of the quota was filled last year. This unfilled quota represented about $55-million in lost market access for New Zealand over two years, according to the complaint.

New Zealand is a major dairy exporter, producing about 21 billion litres of milk every year.

“Trade agreements are only as good as their implementation,” Malcolm Bailey, chairman of the DCANZ, said in a statement.

“Canada has adopted an approach to administering CPTPP quotas which break the rules of the agreement and has severely restricted use of the limited market access,” he said.

Alice Hansen, a spokesperson for Trade Minister Mary Ng, called Canada “a fair trading partner” that takes its commitment to CPTPP seriously.

“Our government will always stand up for Canada’s dairy industry, farmers and our supply management system. We have consistently said we will work with industry and with New Zealand on this issue, and we will continue to do so,” she said.

A spokesperson for Dairy Processors Association of Canada said that it is aware of the complaint, and intends to “work collaboratively with the government of Canada to defend our country’s ability to design and implement tariff-rate quota allocation mechanisms that meet its trade obligations and support the domestic dairy industry.”

But Canada is guilty of “not delivering on its signed promises,” said Sylvain Charlebois, director of the Agri-Food Analytics Lab at Dalhousie University in Halifax.

Ottawa’s decision to allocate quota to existing Canadian dairy processors, he said, set up a system that was stacked in favour of the domestic industry.

“All these companies that have their own brands they want to promote,” he said. “Why would they want to import products from abroad?”

Lawrence Herman, an international trade lawyer with a long history in government, pointed to the January, 2022, decision in the U.S.-Canada trade dispute.

In that case, the United States-Mexico-Canada Agreement panel found that Canada had reserved about 85 per cent of imports for Canadian processors. The panel found Canada in breach of its USMCA promises.

“In the U.S. case, it’s clear that the Government of Canada was not meeting its trade obligations. And that is a reflection of the influence of the dairy industry and the pressure it brings to bear on the Canadian government,” Mr. Herman said.

“And I’ll go on to say that a lot of that influence is due to the fact that there are votes in rural constituencies in Quebec and in eastern Ontario that are important to the government of the day – whether it be a Conservative government or Liberal government.”

Prof. Charlebois predicted that European countries might soon follow suit with trade complaints of their own.

And ultimately, he said, it’s Canadian consumers who lose out – on product choice, variety and price.

“Right now, food prices are a huge issue for a growing number of households,” he said.

And though imported products don’t guarantee lower prices, “if you don’t allow more competition, you’re never going to see lower prices,” he said.

“You’re just going to see prices rise, no matter what.”

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