New Zealand Triumphs in Dairy Access Trade Dispute Against Canada

06 Sep, 2023

New Zealand Triumphs in Dairy Access Trade Dispute Against Canada

In a significant victory for New Zealand, the country has successfully resolved its trade dispute with Canada regarding access for dairy products under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) free trade agreement.

Under the terms of the CPTPP, New Zealand had secured improved access for its dairy products within the Canadian market. However, New Zealand raised concerns that Canada was manipulating quotas to obstruct dairy exporters from accessing their market.

An independent panel convened to address the dispute has now ruled that Canada had improperly utilized dairy quotas to restrict the entry of dairy exports and safeguard its domestic dairy industry. This ruling represents a major win for New Zealand's dairy producers.

Trade Minister Damien O'Connor highlighted the significance of this ruling, noting that Canada had not upheld its commitments under the CPTPP by effectively obstructing access for New Zealand's dairy industry to expand its exports. He emphasized that this situation must change, and the victory underscores the need for Canada to fulfill its obligations.

It is estimated that the tactics employed by Canada in blocking access to its market had cost New Zealand exports approximately $120 million over a span of three years.

This dispute marked a historic moment as the first trade dispute within the CPTPP framework and New Zealand's first under any free trade agreement. O'Connor expressed confidence that the ruling would instill exporters with the assurance that the mechanisms in place would guarantee the market access agreed upon by all member nations.

The core of the dispute revolved around New Zealand exporters' ability to utilize Canada's 16 dairy tariff rate quotas, which allow a specified quantity of products to enter either tariff-free or at a reduced rate. Once these quotas were filled, higher tariffs would apply to additional volumes. The panel's findings revealed that Canada had given priority access to its domestic dairy processors, effectively excluding potential buyers of New Zealand produce, including local retailers.

Although the panel, consisting of three members, declined two of the lesser aspects of New Zealand's complaint related to consultation over quota changes and the implementation of new quotas, this ruling serves as a significant victory for New Zealand.

Australia actively supported New Zealand's position throughout the dispute, making submissions as an interested third party.

Trade Minister O'Connor emphasized that Canada remains a valued diplomatic and trade partner, and the dispute resolution mechanism within the CPTPP allowed for a neutral path to address this issue.

The Dairy Companies Association of New Zealand's Executive Director, Kimberly Crewther, expressed jubilation over the news, highlighting the importance of dispute provisions in trade agreements. She criticized Canada for undermining the access it had promised by reserving most quota quantities for domestic processors, who were less likely to import.

Crewther acknowledged the dedication and hard work of the New Zealand team behind the case, noting the challenges of defending access rights under trade agreements, especially when confronting a G7 country known for bending the rules. Despite the favorable outcome, she expressed frustration with Canada's repeated pattern of requiring legal enforcement to adhere to international trade commitments. Crewther called upon the Canadian government to swiftly adopt a fair and transparent system to rectify the situation, as its failure to fulfill obligations had hindered New Zealand's trade opportunities for an extended period.