U.S. Dairy Exporters Demand Changes to Canadian Rules for Tariff-Free Imports

Strategic Insights -

U.S. dairy exporters have been unable to penetrate the Canadian market to the degree negotiated under the U.S.-Mexico-Canada Agreement due to Canada's rules around imports. The United States has long argued that Canada's tariff rate quota (TRQ) licence rules are a breach of the USMCA, and are why exporters have been unable to sell into the Canadian market at the volumes negotiated in 2018. The U.S. Dairy Export Council, led by executive vice-president Shawna Morris, is demanding that Canada rewrite its rules to allow retailers and food-service companies to import dairy products tariff-free. This change would benefit U.S. dairy exporters and provide Canadian consumers with a wider range of products.

Key Takeaways:

  • The U.S. Dairy Export Council is demanding that Canada rewrite its rules to allow retailers and food-service companies to import dairy products tariff-free.
  • Under current rules, only processors and distributors can import U.S. dairy products without facing levies that can surpass 250 per cent.
  • The United States has long argued that Canada's TRQ licence rules are a breach of USMCA and are hindering U.S. dairy exports.
  • In 2024, the value of U.S. dairy exports to Canada was US$1.18-billion, a 69.4 per cent increase from US$697.09-million in 2016.
  • The U.S. has not penetrated the Canadian market to the degree it negotiated under USMCA, with a fill rate of 83 per cent for dairy products like butter and cheese, but below 10 per cent for many other products.
  • The licensing rules skew the type of product imported into Canada, with processors importing less of the available quota under industrial categories.
  • Canada's government has held firm against U.S. demands, stating that it remains committed to preserving supply management and standing up for Canadian dairy farmers, workers, and the communities they support.
  • Total market access lost to foreign competitors for dairy products under all Canada's trade commitments, including USMCA, is estimated at approximately 10 per cent of domestic production, while Dairy Farmers of Canada estimates the loss to be 18 per cent.

Statistics:

  • Value of U.S. dairy exports to Canada in 2024: US$1.18-billion.
  • Increase in value of U.S. dairy exports to Canada from 2016 to 2024: 69.4 per cent.
  • Fill rate for TRQ allotment for "cheese of all types" in 2024: 83 per cent.
  • Total market access lost to foreign competitors for dairy products under all Canada's trade commitments, including USMCA: approximately 10 per cent of domestic production.
  • Dairy Farmers of Canada's estimate of market access lost: 18 per cent of domestic production.

Sources:

  • The United States Department of Agriculture.
  • Agriculture and Agri-Food Canada.
  • Dairy Farmers of Canada.
  • Osler, Hoskin & Harcourt LLP.
  • Retail Council of Canada (RCC).
  • U.S. Dairy Export Council.