Trade Minister Todd McClay says he is considering “all possible options” to deal with Canada’s ongoing flouting of dairy import rules under the Comprehensive and Progressive TransPacific Partnership trade agreement.
New Zealand last year used the dispute resolution provisions of the CPTPP to successfully challenge Canada’s allocation of low-tariff import quota granted under the agreement.
The disputed system had resulted in less than 10% of the 16 dairy quotas created for NZ under CPTPP being filled by imports in its first three years. The remainder was allocated to local processors.
If NZ dairy exporters want to sell into the Canadian market without a quota they face trade-stopping tariffs of up to 300%.
It is estimated that squeezing NZ exporters out of CPTPP quota allocations cost the industry $120 million in lost sales in the agreement’s first three years.
A panel of three international judges ruled in NZ’s favour in its dispute with Canada last September.
The Canadian government has now circulated a new allocation method in an effort to comply with the ruling and CPTPP rules.
Both the Dairy Companies Association of NZ (DCANZ) and the NZ government believe the proposal still falls short.
McClay said he will raise the matter again with his Canadian counterpart at a World Trade Organisation meeting later this month.
“We have made it clear that we expect Canada to comply fully with the CPTPP panel outcome,” McClay said.
“We do not consider Canada’s proposals achieve that.
“I’m seeking legal advice from officials on next steps and will consider all options available to us,” he said. One lawyer spoken to said NZ may have limited legal avenues left to bring Canada into line.
“Whether it is bilateral trade agreements or through the WTO, one of their great failings is that you will find a country will change its policy but really have no intention of changing their system.
“There will probably be some procedure where the other country is not happy with the system being proposed and you enter into consultations but they often go on forever without achieving anything and this is why dispute settlement under trade agreements is often very unsatisfactory.
“I imagine McClay will want to give some confidence to the dairy industry and will talk a big game but in the end it will be just more chat.”
The government could withdraw tariff concessions granted under CPTPP on Canadian exports to NZ but this is likely to have little impact.
NZ’s best bet might be encouraging the other CPTPP countries to put pressure on Canada to live up to the agreement’s free trade ideals.
DCANZ executive director Kimberly Crewther noted that a number of those countries participated in the panel hearings last year as observers.
“When one party in the agreement stops adhering to the agreement then it starts to undermine the agreement for all parties.
“At that point it becomes a far bigger issue than just NZ and Canada.”
CPTPP members include NZ, Australia, Canada, Brunei, Japan, Singapore, Malaysia, Peru, Vietnam, Chile, Mexico and the United Kingdom.
