U.S. Ag Chief Seeking 'Creative' Ways to Sell Dairy in Canada After Trade Dispute Loss

U.S. Agriculture Secretary Tom Vilsack said on Wednesday that the Biden administration was looking for "creative" ways to sell more U.S. dairy products in Canada after a trade dispute panel ruled in favor of Canadian restrictions on dairy import quotas.

Vilsack told Reuters that the U.S. Department of Agriculture and the U.S. Trade Representative's office were weighing next steps in the long-running dispute over Canada's largely closed dairy market, but declined to say whether they would bring new challenges under the U.S.-Mexico-Canada Agreement on Trade (USMCA).

"What I can tell you is that we're going to continue to look for creative ways to promote and sell dairy products in Canada, and to basically get our fair share of the market up there - as the Canadians promised," Vilsack said during a meeting with Reuters reporters and editors in Washington.

He did not identify specific steps, but said USDA and USTR would work to persuade Canada to provide market opportunities "in the same way they're going to basically articulate the need for more openness to some of our markets. That advocacy is going to continue."

A three-person panel rejected U.S. arguments that Canada was improperly limiting U.S. access to its dairy market by allocating most import quotas to Canadian processors of powdered milk, cheese, ice cream and other dairy products based on a market-share approach

The case was the second time that USTR had raised a complaint about Canada's implementation of limited market access granted in the 2020 USMCA trade deal. USTR won the first round, forcing revisions to Canada's quota practices, but argued that these prevented retailers and food service operators from purchasing cheaper finished U.S. dairy products.

The USMCA agreement kept in place Canada's decades-old supply management system, which restricts domestic production of dairy, eggs and poultry to stabilize incomes of dairy farmers while protecting them from import competition with high tariffs.

Vilsack said USDA and USTR would focus on enforcing the dispute panel's 2022 decision to "make sure that the acknowledgement and direction from the first decision is carried forward." In that decision, a USMCA dispute panel ruled that reserving 80%-85% of the tariff rate quotas for Canadian processors violated the agreement

He said Canada's supply management system was resulting in Canadian consumers "spending a heck of a lot more for dairy products than they should."

But he acknowledged that the system is entrenched in Canadian politics, with a strong advocacy system. Canada's roughly 10,000 dairy farmers form one of the country's most influential political lobbies. Most farm in Quebec and Ontario, the provinces with the most parliamentary seats.