NZ escalates dairy dispute with Canada

New Zealand has escalated its dairy dispute with Canada, triggering a negotiation process that could eventually lead to the Government taking retaliatory trade action.
Further action against the country could also follow, with Trade Minister Todd McClay continuing to speak to the dairy industry about whether to take a case to the World Trade Organization.
On Friday morning, McClay announced the Government had notified members of the CPTPP trade deal that New Zealand had triggered mandatory negotiations over Canada blocking Kiwi dairy exporters’ access to their market.
In September last year, a CPTPP disputes panel found New Zealand exporters were not able to fully utilise Canada’s 16 dairy tariff rate quotas, and that the country was granting priority access to its own domestic dairy processors.
While Canada was given until May 1 this year to change how it administered its tariff rate quotas, New Zealand believed it still was not fully meeting its obligations, leading McClay to seek urgent legal advice on the next steps.
Speaking to Newsroom about the decision to trigger formal consultations, he said the Government had considered the matter carefully before taking further action, given it was the first time there had been a dispute between any of the countries in the CPTPP.
“Canada’s a good friend of New Zealand, we work together well, we do a lot on the world stage, but they owe us, and they have an obligation to New Zealand exporters.”
He and others had held multiple meetings with their Canadian counterparts to find a solution, but dairy access appeared to be “sensitive and difficult for them”, even though the country’s current government had been in power when the deal was signed.
“It’s not a large amount of trade, so this is a matter of principle as much as what was negotiated, and we were very clear coming into government that we would stand up for the rights of New Zealanders.
“We take our obligations to others seriously, we expect them to show the same courtesy.”
Dairy Companies Association of NZ executive director Kimberly Crewther told Newsroom the organisation was pleased to hear of the Government’s action, and hoped Canada would fulfil its CPTPP requirements in full as a result.
“It’s important to us as exporters that we make every effort to have countries honour their commitments to us,” Crewther said.
Under the terms of the CPTPP dispute settlement process, negotiations must now start within 15 days, “with a view to developing mutually acceptable compensation”.
If the two sides are unable to agree on compensation within 30 days of negotiations beginning, New Zealand can then choose to suspend some of the benefits it owes to Canada under the CPTPP.
Separately, McClay said he was still speaking to the dairy industry about a request for the Government to take up a World Trade Organization case against Canada.
In August, Farmers Weekly reported DCANZ had written to McClay with concerns about Canada’s system of subsidising milk production, which it believed was having a negative effect on prices in a number of international markets.
“We are seeing increased investment to expand Canada’s production capacity and Canadian exporters targeting our members’ high-value customers,” DCANZ said, warning of an “immediate risk” to $500 million in sales of milk protein concentrates and isolates, and in time another $400m of casein sales.
McClay told Newsroom he was still in discussions with the industry to quantify the size of the financial loss it had experienced, and whether that could be proved. New Zealand was also talking to other countries to see whether they held similar concerns.
While the WTO’s dispute settlement mechanism has in effect been paralysed since 2019 due to a United States veto on the appointment of new judges, both Canada and New Zealand are members of a separate dispute body set up as an interim solution, although McClay said it was unclear how robust that was.
“Countries have a right to do things with their own industries under WTO rules. They don’t have a right to distort markets as a result of protectionism…
“The New Zealand dairy industry is right to be concerned … but concern and actually something that could be prosecuted [are] different things.”