TL;DR:
- New Zealand’s Trade Minister Todd McClay to address Canada’s dairy policies affecting NZ exports at a global trade meeting.
- Concerns over Canadian subsidised dairy exports undercutting New Zealand in the US market.
- Legal options are considered against Canada’s Milk Class 4(a) for violating international trade rules.
Trade Minister Todd McClay is set to confront Canada over its dairy policies, which are impacting New Zealand’s dairy exports. At an upcoming meeting in Abu Dhabi with global trade ministers, McClay plans to discuss Canada’s non-compliance with the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) and its subsidised dairy exports to the US, which are undercutting New Zealand exporters.
Fonterra’s CEO, Miles Hurrell, highlighted the challenge posed by subsidised Canadian dairy products to Fonterra’s business in the US. Despite facing high tariffs on lower-value commodities, Fonterra has successfully penetrated the US market with higher-value products, making it Fonterra’s fourth-largest market by value. However, the growing exports of subsidised Canadian milk protein threaten Fonterra’s value-add business in the US.
The issue of subsidised Canadian milk exports is not new. In 2016, the New Zealand dairy industry joined an international coalition to challenge Canada’s Milk Class 7 system, accusing it of violating World Trade Organisation (WTO) rules by dumping skimmed milk powder on the global market at below-market prices.
This practice was believed to cost New Zealand dairy farmers around $100 million a year in lost earnings. Although action was taken in 2018 when then-President Donald Trump negotiated a cap on Canadian dairy exports, the problem has resurfaced under Canada’s new Milk Class 4(a).
Kimberly Crewther, executive director of the Dairy Companies Association of New Zealand (DCANZ), expressed frustration over Canada’s continuous adjustments to its dairy pricing classifications, which now extend beyond skimmed milk powder to other protein products, disadvantageous to unsubsidised producers.
Crewther pointed out that Milk Class 4(a) violates a WTO ban on export subsidies and potentially other trade rules. While a WTO case might be futile due to the organisation’s dysfunctional appeals system, Crewther mentioned that other legal avenues are available, noting that both Canada and New Zealand are members of the Multi-Party Interim Appeal Arbitration Arrangement, an alternative tribunal for trade disputes.
Minister McClay echoed DCANZ’s concerns, emphasising the seriousness of the issue for New Zealand’s dairy industry and the global trading system. He stated that New Zealand is exploring all options, including legal action, and expects Canada to fulfil its obligations. McClay plans to raise this issue with his Canadian counterpart and other countries at the WTO Ministerial meeting, alongside concerns regarding the CPTPP panel ruling’s implementation.
