New Zealand looks set to call in the lawyers once again, just six months after winning a groundbreaking case against Canada for failing to uphold its obligation under the Comprehensive and Progressive TransPacific Partnership to open up its dairy markets.
A panel of three international judges in September ruled in NZ’s favour when it said Canada had not complied with the 12-country trade agreement when it allocated the bulk of the import quota created for NZ exporters to its own local processors. The case was the first taken by one CPTPP member against another.
Exporters estimate their failure to get their hands on low-tariff quotas for 16 dairy import categories cost them $120 million in lost earnings in the agreement’s first three years.
Last month Canada called for submissions on its proposal for a new allocation method due to start on May 1.
Trade Minister Todd McClay cornered his Canadian counterpart Mary Ng at a meeting of global trade ministers in Abu Dhabi recently.
“We have said we will be submitting in the process and I made it very clear to her that if they do not make the changes to meet those obligations, we will take further legal action.”
McClay said he agreed with the NZ dairy industry that Canada’s latest proposal still does not follow the CPTPP’s rules.
“If there is a disagreement then the mechanism is there in CPTPP, and if we win again, which I expect we would, they would be forced to make another change,” McClay said.
Asked whether Canada’s latest proposal could be a tactic to draw the NZ government into a never-ending cycle of legal cases without ever intending to comply with the CPTPP and open up its dairy markets, McClay said that was possible.
“They could keep on doing that and there are many other options before we get to that point, but at the moment what I am asking officials to consider is does it meet their obligations under CPTPP?
“I believe it doesn’t and so we will take the next step which is going back to challenge that.”
Asked whether he would consider raising tariffs on Canadian exports to NZ should the Canadian government continue to fail to uphold its obligations, McClay said he would “reserve the rights to take any action we think is appropriate under CPTPP”.
Meanwhile McClay said he had also spoken to Ng about growing concerns among NZ dairy exporters that they risk being undercut in the United States market by subsidised Canadian rivals.
Fonterra chief executive Miles Hurrell singled out Canada’s Milk Class 4(a) system of dairy subsidies late last year as the largest threat to the co-operative’s business in the US.
As well as expressing the NZ government’s concerns in person, McClay said he will follow that up with a formal letter.
McClay said he also raised the matter with US Trade Representative Katherine Tai at the World Trade Organisation ministerial meeting in Abu Dhabi.
“I indicated that I would like to talk to the US more about this in the coming months when I have a chance to get up there.
“But the first thing to do is to raise it with the Canadians, which I did.”
