New Zealand reluctantly gets into trade dispute over Canadian dairy

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New Zealand is reluctantly pressing forward in an unprecedented trade dispute with fellow TPP signatory Canada over access to dairy markets, bolstered by a recent landmark tribunal win for U.S. farmers.

The island country’s Minister for Trade and Export Growth, Damien O’Connor, was in Ottawa this week meeting with federal government officials on issues including dispute-settlement proceedings that New Zealand launched in early May regarding Canadian dairy quotas.

The case marks the first dispute put forward under the Trans-Pacific Partnership, a trade agreement signed in 2018 by 11 countries. Wellington alleges that Ottawa’s approach to quotas denies domestic market access to its exporters across a wide range of products, including milk, cheese, yogurt and ice cream.

“I’m saddened the situation has come to this, but we can’t ignore violations of a historic agreement,” Mr. O’Connor said in an interview in Toronto.

Dairy products make up New Zealand’s single largest export sector. Its government estimates lost market access cost its exporters $68-million over the first two years of the TPP, with the costs now rising as quotas increase each year.

Under the terms of the TPP, New Zealand and Canada are obligated to engage in formal negotiations to resolve the dispute. If the two countries fail to reach an agreement, New Zealand can request a panel to adjudicate the issues.

The veteran Labour Party minister indicated that once the disagreement between the two friends is resolved, “the sky is the limit” for New Zealand’s trade relationship with Canada.

“We work well together on issues such as foreign policy and social justice,” Mr. O’Connor said.

New Zealand’s dispute echoes recent American cases that have also alleged protection for Canadian dairy producers. In January, the U.S. government won the first trade dispute brought under the United States-Mexico-Canada Agreement – which came into force in July, 2020.

The USMCA panel ruled that Canada breached the trade deal by reserving most of its dairy quotas for domestic producers. In a press release, U.S. Trade Representative Katherine Tai said: “This historic win will help eliminate unjustified trade restrictions on American dairy products.”

In late May, the U.S. government launched a second challenge to Canadian dairy quotas, pushing for dispute settlement talks between the two countries. Ms. Tai said: “We communicated clearly to Canada that its new policies are not consistent with the USMCA and prevent U.S. workers, producers, farmers, and exporters from getting the full benefit of the market access that Canada committed to under the USMCA.”

With $16-billion in foreign sales in 2020, New Zealand’s dairy industry accounted for one of every three dollars of the country’s exports, according to the Dairy Companies Association of New Zealand. The top destinations for New Zealand’s dairy products are currently China, Australia and the U.S.

In Canada, the domestic dairy industry – farmers and producers – generates annual sales of $23-billion, according to the federal government. In 2020, Canadian dairy imports totalled $957-million, with the U.S., New Zealand and Ireland as the top three suppliers.

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