New Zealand dairy exporters can claim a solid victory after a ruling in their favour in a dispute with Canada over how that country manages the entry of trade partners’ dairy products to its market.
As a CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) partner, Canada is obliged to allow a portion of NZ dairy products into its market through a quota allocation.
But NZ exporters found Canada was blocking access to its domestic dairy sector, and last year it initiated formal dispute proceedings.
Vangelis Vitalis, deputy secretary for the Ministry of Foreign Affairs and Trade, said the decision made by the three-member review panel in favour of NZ is a clear one, and Canada has to change.
Estimates are about $120 million of dairy sales were affected by the Canadians’ blocking move over a period of three years.
Canada was not financially penalised for its actions, but the country is compelled under CPTPP rules to cease and desist, and fall into line with the agreement’s principles.
The decision marks the first time NZ has initiated a dispute under the CPTPP agreement.
The three panellists determined that Canada is not allowed to favour its domestic industry, that access to quotas must not be compartmentalised in any way, and that Canada cannot exclude retailers from accessing quotas.
There could also be no priority access granted to dairy quotas domestically.
The total Canadian dairy import market is estimated to have averaged $2 billion a year for the past five years, compared to $2.4bn for Mexico and $4.2bn for Japan, both also signatories to the CPTPP.
The quota volumes under the CPTPP allocation are 93,166t, with the bulk of 50,000t being liquid milk. Skim milk powder amounts to 7500t, yoghurt-buttermilk 6000t and industrial cheese 7975t.
Canada’s total dairy market is estimated to amount to 9.3 million tonnes of dairy, compared to 9.6 million tonnes in Japan and 16 million tonnes in Mexico.
The Ministry of Foreign Affairs and Trade was unable to provide information on how much of the quotas NZ fills in comparison to other members.
Trade negotiators have welcomed the dispute process as evidence that, despite the World Trade Organisation process having stalled as a disputes forum, it is still possible to continue to seek a rules-based approach under trade agreements.
Vitalis noted NZ and Canada continue to have a strong friendship and said the dispute proves the CPTPP has a viable forum for resolving them.
Minister for Trade and Export Growth Damien O’Connor welcomed the ruling in NZ’s favour, calling it a significant win for primary sector exporters.
He said since 2017 government has signed seven new or upgraded FTAs.
“These are hard-won negotiated outcomes and today’s ruling will give exporters confidence and certainty the mechanisms in place will ensure they receive the market access all members agreed to.”
