Question Period Note: CPTPP AND CUSMA DAIRY TARIFF RATE QUOTAS DISPUTES

Q1– What is the ruling of the CPTPP Panel? Q2 – What are the details behind the settlement of the TRQ dispute with New Zealand? Q3– What is the ruling of the second CUSMA Panel? Q4-What are the expected next steps from the United States on the issue of dairy?

R.1 - Canada is very pleased with the overall findings of the Panel’s report, which recognized that Canada has a margin of discretion in setting its Tariff Rate Quotas (TRQs) allocation policies, including determining who is eligible to obtain an allocation.
In May 2024, Canada published new CPTPP dairy TRQ allocation and administration policies, which include the removal of the pooling system and some administration changes. R.2 - Canada has reached a mutually satisfactory solution with New Zealand to resolve the dispute.
Officials have worked very closely with dairy sector representatives and the provinces throughout the process.
The impact for Canada is limited to certain technical CPTPP TRQ administration changes. There are no changes in market access.
These technical policy changes are limited to Canada's CPTPP TRQs and the parties to the CPTPP agreement.
These changes will be published on October 1, 2025, for implementation beginning with the 2026 calendar year dairy TRQs. R.3 - The Panel ruled in Canada’s favour on all claims made by the United States.
Based on the Panel’s conclusion, Canada is not required to make any changes to its CUSMA dairy TRQ allocation measures. R.4 - The U.S. Administration, members of Congress and the dairy industry expressed disappointment with the second CUSMA dairy dispute findings.
For CUSMA disputes, there is no appeal process.
Canada is confident that our practices align with our obligations under CUSMA.
Canada will preserve and defend its supply management system.

CPTPP Dairy TRQs Dispute

The final Panel report in the dispute brought by New Zealand against Canada regarding the administration of Canadian dairy tariff rate quotas (TRQs) was made public on September 5, 2023.
To implement the Panel’s findings, Global Affairs Canada held public consultations from February 6 to March 7, 2024, and published new CPTPP dairy TRQ policies on May 1, 2024. The implementation of the new policies began on August 1, 2024, marking the start of the 2024-2025 dairy year. These new policies include the removal of the pooling system (as was done for implementation following the first CUSMA dairy TRQs dispute), and some administration changes.
These new policies generated significant negative reactions from New Zealand’s government and industry.
Detail on the Panel’s findings:

The CPTPP Panel found against Canada on 2 of the 6 claims. The Panel ruled that Canada is in violation of its obligation to allow importers “the opportunity to utilize TRQ quantities fully”, and that Canada’s pools that reserve access to a percentage of each TRQ for dairy processors violate Canada’s obligation to ensure that it does not “limit access to an allocation to processors”. Also, the majority of the Panel (2 of the 3 panelists) found 2 claims in Canada’s favour: that Canada’s exclusion of retailers from TRQ eligibility falls within Canada’s discretion; and that Canada’s measures do not introduce a “new or additional condition, limit or eligibility requirement on the utilization of the TRQ for the importation of a good”. In light of its findings on other provisions, the Panel deemed it unnecessary to make findings on the remaining 2 claims made by New Zealand on: whether Canada’s procedures for administering TRQs are fair and equitable, and whether Canada ensures that each allocation is made, to the maximum extent possible, in the amount importers request.

Detail on resolution of the Dispute:

Pursuant to Article 28.20(1)(b) of the CPTPP, on October 17, 2024, New Zealand officially took the next step in the dispute by requesting that Canada enters into negotiations with a view to developing mutually acceptable compensation.
Engagement on settling the dispute has led to Canada reaching a mutually satisfactory solution with New Zealand to resolve the CPTPP dairy TRQs dispute. This agreement, negotiated in close consultation with Canadian dairy stakeholders, will result in certain minor policy changes to Canada’s TRQ administration, and does not amend Canada’s market access commitments. These technical policy changes are limited to quotas administered under the terms of the CPTPP and will not negatively impact Canada’s dairy industry or supply management. With these changes, New Zealand has confirmed that it will not take further action under the CPTPP dispute settlement process. These changes will be published by Global Affairs Canada on October 1, 2025, for implementation beginning with the 2026 calendar year dairy TRQs.

CUSMA Dairy TRQs Disputes
First CUSMA Dairy TRQ Dispute
On January 4, 2022, the Panel report was made public. The Panel found that Canada’s practice of reserving TRQ pools exclusively for the use of processors (including further processors) is inconsistent with CUSMA. The Panel made no findings on the three other claims brought by the U.S., as the Panel considered it was unnecessary to resolve the dispute.

To comply with the Panel’s findings, Global Affairs Canada (GAC) published new CUSMA dairy TRQ policies on May 16, 2022, following public consultations. The new policies ended the practice of reserving TRQ pools exclusively for processors and, instead, allocate to distributors, processors and/or further processors based on market share. These policies generated significant negative reaction from U.S. industry, U.S. Congress and U.S. Government, who expected more or different reforms to Canada’s administration of its CUSMA dairy TRQs.

Second CUSMA Dairy TRQ Dispute

On January 31, 2023, the U.S. requested the establishment of a second dispute settlement panel on Canada’s dairy TRQ policies under CUSMA. In this request, the United States made 4 overarching claims of violation under several CUSMA provisions, including the ineligibility of retailers and food service operators under the TRQs, the 12-month activity requirement, Canada’s methodology for calculating TRQ allocations through market share, and TRQ return and re-allocation policies.
The final Panel report was made public on November 24, 2023, and ruled in Canada’s favour on all claims. This outcome will have no impact on Canada’s CUSMA dairy TRQ administration. Based on the Panel’s conclusion, Canada was not required to make any changes to its CUSMA dairy TRQ allocation measures. There is no appeal mechanism under CUSMA.
The U.S. Administration, members of Congress and the dairy industry expressed disappointment with the second CUSMA dairy dispute ruling.

• Canada takes its trade commitments seriously.

• The Government defended supply management during the negotiations of these agreements and through all three dairy Tariff Rate Quota disputes.

• We always stand up for the Canadian dairy industry, the farmers, workers, and the communities it supports, and we will continue to do so.

• As highlighted in the May 27, 2025 Speech from the Throne, this Government remains committed to maintaining, protecting and defending supply management.