The New Zealand government has decided to move ahead and take legal action against Canada for breaching a vital trade agreement involving NZ.
An announcement was made today and follows months of unsuccessful “consultations” with Ottawa.
NZ says Canada has breached an obligation that would avert punitive 200% tariffs on NZ dairy exports to the Canadian market.
These exports are supposed to be allowed under the landmark trade deal, the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP).
But trade experts say the quotas which are specified in the CPTPP have not been made available to NZ.
Instead, the quotas have been granted to domestic dairy processors within Canada and the dairy production required to meet those quotas has been done by Canadian producers under various forms of vertical integration.
The percentage of that quota available to NZ is derisory, as low as 5% according to some experts.
NZ has long regarded this as a breach of the CPTPP and it requested consultations with Ottawa last May.
At the time, the Trade Minister Damien O’Connor said the Canadian action had cost NZ exporters $68 million in potential lost sales in the first two years of the CPTPP.
He indicated the value of these losses would rise as the intended export entitlement of CPTPP expanded over time.
The problem affects 14 different product lines within the dairy industry.
NZ trade experts have now come to the conclusion that the Canadian authorities have been stalling for time since the request for consultations was made in May.
The experts believe that instead of coming up with substantive new proposals, the Canadian authorities have been making minor adjustments to their trade documents and then trying to pass them off as new policy.
So a decision has been made to take legal action.
In trade-speak, this is called a “request to form a panel”.
This panel would be a group of three people to arbitrate the dispute.
One would be appointed by NZ and one by Canada.
Those two people would then choose a third person to chair the panel.
An arbitration ruling against Canada could be enforceable in the Canadian courts, but that idea is not being entertained by NZ at present.
Officials here insist the CPTPP has an established disputes procedure and all parties have agreed to abide by it.
In moving to this stage, NZ is breaking new ground.
It will be the first enforcement action taken since the CPTPP came into force and the first such action taken outside the WTO.
This action by New Zealand is coming late in the year and Wellington is preparing for a limited response from Canada until after Christmas.
But the government is determined to stand its ground.
This whole problem is connected with a high level of political influence wielded by the dairy industry in Canada.
This stems partly from strict regulation of the industry, in which the quantum of production is restricted.
This gives dairy producers leverage over politicians and also keeps prices high in the supermarket.
