U.S. dairy producers renew challenge to Canada’s CUSMA market access

U.S. producers renew market-access complaint

The National Milk Producers Federation says Canada has consistently failed to provide the dairy market access promised to U.S. companies under the Canada-United States-Mexico Agreement, known as CUSMA in Canada and USMCA in the United States. Shawna Morris, executive vice president at the federation and the U.S. Dairy Export Council, told CTV News that Canada continues to fall short of its commitments.

The complaint adds to a dispute that has followed the trade agreement since it entered into force. CUSMA created new Canadian tariff-rate quotas for milk, cream, skim milk powder, butter and cream powder, cheese and other dairy products. Imports within these quotas can enter duty-free, while shipments outside the allocated volumes face Canada’s regular tariff treatment.

Quota allocation remains the central issue

Global Affairs Canada’s economic assessment says the dairy quotas were to be introduced in six equal increments over five years. From the seventh year, the quotas receive annual compound growth of 1% for 13 years. The government’s example for milk shows a duty-free volume of 50,000 metric tonnes rising to 50,500 metric tonnes in year seven. Canada and the United States also agreed to eliminate tariffs on whey products within 10 years.

U.S. industry groups argue that nominal quota volumes do not necessarily translate into commercially usable access. Morris told RFD News that Canada had opened the required tariff-rate quotas but allocated much of the access to Canadian processors. In her account, that leaves American suppliers trying to sell through companies that are also their competitors. Canada’s published policy for the CUSMA milk quota states that 85% is reserved for bulk goods that are not intended for retail sale and must be processed into dairy products used as ingredients in further food manufacturing.

Canada presents a different view. Canadian government briefing material states that the United States already benefits from significant dairy access under CUSMA. The continuing disagreement is therefore less about whether quotas formally exist than about who receives the import rights, which products can use them and whether the allocation system provides the commercial access expected by U.S. exporters.

Dairy proteins broaden the dispute

Market access is not the only concern raised by the U.S. industry. In comments submitted to Canada, the National Milk Producers Federation and the U.S. Dairy Export Council said CUSMA’s export thresholds for skim milk powder, milk protein concentrates and infant formula were designed to prevent the effects of Canada’s supply-management system from being transferred to the United States and other markets. The groups said Canadian exports of other skim-milk derivatives had grown through tariff lines not specifically covered by those limits.

They singled out Canadian shipments to the United States under the heading for peptones and other protein substances, HS 3504, arguing that their growth undermined the agreement’s disciplines on milk protein concentrates. The organizations called for those routes to be closed. Canada’s own briefing material acknowledges that U.S. trade concerns include milk pricing, market access and Canadian exports of certain dairy products.

Enforcement pressure could intensify

For dairy processors and traders, the outcome will determine whether the promised quotas become practical sales channels or remain concentrated among Canadian incumbents. U.S. suppliers have a direct interest in obtaining allocations that permit relationships with distributors, retailers and end users, while Canadian processors and producers have an interest in preserving the supply-management system and its controlled import structure.

NMPF has framed Canada’s dairy practices as an unresolved priority in the CUSMA review process. Morris has said the industry would prefer negotiations to escalating tariffs, but the persistence of the complaint increases the prospect of further bilateral pressure. Any settlement would need to address both the administration of import quotas and the U.S. claim that dairy protein exports are bypassing agreed disciplines.