Canada will abide by a trade ruling that decided the country unfairly subsidizes dairy products sold to the United States and New Zealand, International Trade Minister Pierre Pettigrew said yesterday.
Although he's unhappy with the ruling by the World Trade Organization, Mr. Pettigrew said he will consult with the provinces and the dairy industry to determine how to best implement it.
"We're obviously very disappointed with the decision," the Trade Minister told a news conference after a luncheon speech. "It's obvious that we regret the decision."
Mr. Pettigrew said he doesn't believe the Canadian system unfairly subsidizes dairy products.
Earlier yesterday, an appeals panel of the WTO rejected Canada's appeal against a ruling that the federal Commercial Export Milk program, which supplies milk to producers of dairy products, amounts to a banned export subsidy. The dispute involves mainly cheeses from Quebec and Ontario that are worth more than $400-million annually.
Yesterday's ruling found sales by Canadian milk producers to milk processors under the program are at below cost and said this was "financed by virtue of governmental action" because the Canadian government set the domestic price of milk at above-market prices.
"As a result of this governmental action in the domestic market, a significant proportion of Canadian milk producers can cover all of their fixed costs of production through making these highly remunerative domestic milk sales," the World Trade Organization report said.
The United States and New Zealand could now ask the world trade body for permission to impose trade sanctions on Canada.
A group representing Canadian dairy farmers said it was disappointed with the ruling, but will comply with the WTO decision.
Canada's right to operate a domestic system of supply management was never at issue in this dispute, said Leo Bertoia, president of the Dairy Farmers of Canada. "Canadian dairy producers will continue to focus on meeting Canada's demand for dairy products with its supply management system," Mr. Bertoia said.