By: Mariah Casey Guinsatao
The Comprehensive and Progressive Agreement for the Trans-Pacific Partnership, otherwise referred to as the CPTPP, is an international free-trade agreement that outlines the terms of trade in goods, services, investment, labour mobility and inter-government procurement. By establishing clear guidelines regarding key issues such as administration, and state-owned enterprises, the CPTPP aims to create a consistent, transparent, and fair environment to do business in trade markets. An Investor-State Dispute Settlement has emerged between Canada and New Zealand regarding Canada’s use of dairy quotas under the CPTPP.
“Can Canada remain a trustworthy trading partner while advocating for its economy?”
Dairy in Dispute
Canada’s supply management system has been historically critiqued by trading partners who suffer as a result of production controls and tariffs that solely protect Canadian domestic dairy farmers. On May 12th 2022, New Zealand requested formal consultations with the Dispute Settlement Board (DSB) concerning Canada’s integration of tariff-rate-quotas (TRQs) and its negative implications for New Zealand. According to New Zealand’s appeal, Canada’s quotas remain inconsistent with several provisions, including their obligations to ensure the administration of TRQs are equitable among member parties. Canadian businesses have adopted capitalist-oriented strategies that allow reduced tariffs to decrease taxes on exportation, increasing the overall competitive price in Asian-Pacific markets. The CPTPP allows Canada to maintain high tariffs on dairy products, insulating their industry from foreign competition. New Zealand, a large exporter of dairy products, claims that Canada’s implementation of the dairy TRQs has a significant negative impact on New Zealand exporters who are not able to fully benefit from the market access that was negotiated under the agreement. Because Canada’s TRQs often remain unfilled, New Zealand exporters suffer a tangible loss of value in their dairy market. As a result, they have lost upwards of $68 million NZD over the last two years.
A Step Towards Settlement
According to the dispute settlement procedure, Canada was required to submit a written response to the request by May 19th 2022, which will then lead to a consultation between New Zealand and Canada to settle the dispute on June 11th. The conclusions from this negotiation have yet to be announced. If the consultation fails to come to mutual agreement, New Zealand could request the establishment of a dispute settlement panel for further adjudication as soon as July 11th. The panel process will take approximately eight months; the final being issued sometime in March of 2023. Damien O’ Connor, New Zealand Minister for Trade and Export Growth states, “Dispute settlement mechanisms in free trade agreements such as the CPTPP exist to provide a neutral forum for settling such disputes when they arise”.
Because Canada’s TRQ administration is divided into supply chains, most dairy products are distributed among domestic processors. This enables low-value, imported milk and cheese to be manufactured into higher-value retail products, preventing Canadian consumers from accessing quality, affordable dairy products from New Zealand. The United States has successfully resolved a similar dispute with Canada in the past, concluding Canada’s TRQ allotment system in breach of the USMCA. Canada pursued a revised TRQ system in March 2022, which only seemed to replace one protectionist policy for another. Alice Hansen, Spokesperson for Trade Minister Mary MG, defends Canada in her testament, “Our government will always stand up for Canada’s dairy industry, farmers and our supply management system” . As partners persistently seek TRQ, the Canadian government remains forthright in their advocacy for farmer protection.
During a time when free trade agreements are under great scrutiny, Canada adopts a nuanced strategy called the Inclusive Trade Agenda. This strategy pursues trade policies that contribute to the economic success of marginalized-owned Canadian businesses in the dairy market. However, Canada’s selective free trade agenda has resulted in conflicts between investor-states under international policy. While New Zealand has initiated disputes in the World Trade Organization in the past, this is the first dispute New Zealand has filed under a Free Trade Agreement, and the first formal request by any party under the CPTPP. New Zealand is a strong advocate of the multilateral rules-based trading system because it delivers broad benefits to all countries. Although Canada’s free trade agenda promotes national economic liberalization, it may come at the cost of other countries. To which I raise the question, in what ways can Canada remain a trustworthy trading partner while advocating for its economy?
referenced works
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New Zealand Ministry of Foreign Affairs and Trade. (n.d.). Current disputes under New Zealand’s Free Trade Agreement. New Zealand Ministry of Foreign Affairs and Trade. Retrieved June 13, 2022, from https://www.mfat.govt.nz/en/trade/trade-law-and-dispute-settlement/current-wto-disputes/
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Tereposky, G., & Hohnstein, D. (2022, May 25). Daring to challenge dairy: New Zealand challenges Canada’s implementation of dairy quotas under the CPTPP. TEREPOSKY & DEROSE LLP. Retrieved June 13, 2022, from https://tradeisds.com/daring-to-challenge-dairy-new-zealand-challenges-canadas-implementation-of-dairy-quotas-under-the-cptpp/
