The dairy industry is rejecting a Canadian proposal to overhaul the system it uses to allocate import quota under the Comprehensive and Progressive TransPacific Partnership trade agreement.
New Zealand last year used the dispute resolution provisions of CPTPP to successfully challenge Canada’s dairy quota allocations.
An independent panel of three international judges in September found the system effectively prevented NZ dairy exporters from utilising the low-tariff quota made available under the agreement in 2018.
The Canadian government has now circulated a proposal to overhaul the allocation system ahead of the May 1 implementation date for compliance with the ruling negotiated by the two countries.
Dairy Companies Association of NZ (DCANZ) executive director Kimberly Crewther said the proposal fails to bring the Canadians into compliance with CPTPP rules and could be even worse than the original allocation system.
“Canada has proposed to use a new and complex formula to allocate import quota in a way that will continue to put the majority of quota access in the hands of domestic processors, who have little interest in importing from CPTPP countries, and not in the hands of distributors and other importers, including retailers, who do want to import,” Crewther said.
“This proposal is entirely inconsistent with last year’s legal ruling that Canada must allow importers the opportunity to fully utilise the quotas.”
Crewther said NZ dairy exporters lost $120 million in potential sales in the first three years of the CPTPP’s operation due to the illegal quota allocation.
Less than 10% of the 16 dairy quotas created for NZ under CPTPP were filled during this time.
Outside of the quota limits, NZ dairy exporters face trade-stopping tariffs of between 200% and 300%.
“It is very far from the treatment you would expect from a trusted international partner and contrasts with the way that other NZ FTA partners like the UK and China have implemented their commitments,” Crewther said.
Crewther said DCANZ will be “looking for the NZ government to ensure Canada fully complies with the legal ruling”.
Just how the NZ government forces Canada to comply will be a test case for the 12-member CPTPP agreement.
The quota dispute between NZ and Canada is the first to result in a legal challenge since the agreement came into force five years ago.
Farmers Weekly understands the CPTPP agreement provides no right of appeal when countries are unhappy with rulings or fail to comply.
One trade expert said NZ could threaten to withdraw the tariff concessions available for Canadian exports to NZ as one possible means of retaliation, though that is a big step to take.
