New Zealand cheers Canada's loss in dairy dispute and calls for 'significant reform'

New Zealand said Canada needs to overhaul its approach to dairy imports because Prime Minister Justin Trudeau’s government has repeatedly broken its promise to let foreign cheese and butter flow more freely into the country.

The public criticisms are the first in what trade lawyers expect could become an international pile-on following Canada’s loss to the United States this month in a long-running dairy dispute. Canada’s approach to dairy imports has long been a sore spot for trading partners, and the success of the U.S. in challenging that approach could embolden copycat actions under trade agreements Canada signed with the European Union and a group of mostly Asian countries that includes New Zealand, a major dairy exporter.

New Zealand’s ministry of foreign affairs and trade, “is currently considering its next steps to address these serious concerns,” spokesperson Susan Pepperell said in an email on Jan. 17.

The trade ruling that got New Zealand’s attention involved U.S. complaints that Canada was using a work-around to dull the impact of extra dairy imports allowed under the United States-Mexico-Canada Agreement (USCMA), the pact that replaced the North American Free Trade Agreement in 2020.

In the new treaty, Canada agreed to let in more dairy imports, effectively softening its supply management system that has historically used high tariffs on imports to shield the domestic dairy producers from competition. But Canada quickly upset the American dairy industry by handing the majority of the extra dairy import quotas to Canadian dairy companies that had little incentive to bring in competing U.S. brands. The result was that the imports skewed toward lower-value products that importers could turn into more expensive retail goods, including bricks of mozzarella for frozen pizzas...

This was excerpted from the 17 January 2022 edition of the Financial Post.