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Tribunal strikes down Quebec dairy substitute ban

It's taken more than 15 years, but Land O' Lakes Fresh Buttery Taste Spread could finally be heading for supermarket shelves in Quebec.

A trade panel struck down the province's ban on various soy and vegetable oil-based dairy substitutes. The three-member tribunal concluded that Quebec restrictions on the sale and production of blended dairy products violates Canada's Agreement on Internal Trade (AIT), in a decision released Wednesday.

The panel said Quebec's regulation are not justified on "consumer protection" grounds.

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The case, initiated by Saskatchewan, highlights the many lingering trade barriers that still exist between provinces, even as Canada pursues new free trade deals with other countries.

"Saskatchewan is a strong supporter of economic growth through free trade," said Tim McMillan, Saskatchewan's minister responsible for trade. "We initiated the trade challenge on that principle and to ensure everybody is adhering to the same trade rules."

Quebec, the country's largest dairy producer, prohibits the sale of products that mix a bit of butter or milk into vegetable oil or soy-based drinks and spreads. These blended products, such as Land O' Lakes Fresh Buttery Taste Spread and soy cheese, are legal in the rest of the country.

Quebec immediately appealed the decision. The result is that full implementation of the decision could be delayed until late fall.

Dispute settlement is a long and often costly process under the AIT.

Alberta fought for nearly a decade to strike down a similar Ontario ban of the same products. In 2010, Ontario was forced to remove the ban, originally introduced to protect dairy farmers from competition.

But Quebec continued to restrict the products, prompting Saskatchewan to file a new challenge.

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Legal experts said the Quebec ruling was a foregone conclusion, given the precedent set by the Ontario case.

And yet it has taken more than 15 years for the two cases to run their course. Earlier cases involving prohibitions on butter-coloured margarine also took years to resolve.

The tribunal heard the Saskatchewan case in January. Alberta, British Columbia and Manitoba also backed the challenge. The four provinces are major producers of canola and soybean used in the making of dairy substitutes.

"We're confident the original ruling will prevail and that Quebec will adjust its rules as quickly as possible, allowing full access to its market for our producers," Saskatchewan Agriculture Minister Lyle Stewart said.

Food manufacturers also applauded the decision.

"It seems like a small thing, but businesses in Canada should not be discriminated against by unfair trade rules," said Sean McPhee, president of the Vegetable Oil Industry of Canada.

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Quebec officials were not immediately available for comment.

Earlier this year, a coalition of business groups wrote a letter to federal Industry Minister James Moore, complaining that it's a national "embarrassment" that European countries are poised to gain better access to markets in Canada than the provinces enjoy through the recently negotiated Canada-European Union free trade deal.

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