New Zealand escalates trade dispute with Canada over dairy tariff rate quotas

But New Zealand says Canada remains a close friend.
But New Zealand says Canada remains a close friend. Photo credit: Getty Images.

New Zealand is escalating a trade dispute with Canada after consultations between the two countries failed to lead to a resolution. 

In May, New Zealand initiated a dispute over how Canada was implementing dairy tariff rate quotas (TRQs) under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). 

TRQs set out how much of a product can be imported into a country without tariffs or at a lower tariff rate. New Zealand's got an issue with how Canada is administering them for dairy.

Formal consultations took place in June, but Trade Minister Damien O'Connor said on Monday they failed to resolve the matter.

New Zealand has now decided to request the establishment of a panel to hear and decide the dispute. New Zealand and Canada will now engage in a process to select three individuals to sit on the panel, while other CPTPP countries will have 10 days to join the dispute as third parties.

"This is ultimately about ensuring that our exporters can access the benefits that were agreed under CPTPP," said O'Connor.  These were hard-won negotiated outcomes, and it is important that our exporters have confidence and certainty in their ability to enjoy them."

"New Zealand continues to value its strong friendship with Canada, one of our warmest and closest relationships in the world.  This is a discrete trade issue, and the dispute settlement mechanisms in CPTPP provide us with a neutral forum to resolve it."

As primary exports were worth $53 billion to the New Zealand economy last year, O'Connor said it is important for the country's economic security that the rules of trade agreements are upheld.  

"Canada is not living up to the commitments it made under CPTPP to allow dairy products into Canada. This is impacting New Zealand exporters, who remain effectively locked out of the Canadian market, and Canadian consumers, who are missing out on the increased consumer choice that CPTPP promises."

The minister said in May that many of Canada's TRQs have been unfilled, representing a loss by New Zealand dairy exporters estimated to be at $68 million over the first two years. That was expected to increase year-on-year as the size of quotas increased under the deal.

In response to the move by the New Zealand Government in May, a spokesperson for Canadian Trade Minister Mary Ng said her country was a "fair trading partner".

"Our government will always stand up for Canada’s dairy industry, farmers and our supply management system," she's reported by the Financial Post as saying. "We have consistently said we will work with industry and with New Zealand on this issue, and we will continue to do so."

Newshub has contacted the Canadian High Commission for comment on New Zealand's latest move.

While New Zealand has previously brought disputes before the World Trade Organization (WTO), this is the first brought by Aotearoa under a free trade agreement and the first by any party under the CPTPP.

New Zealand has recently signed free trade agreements with the United Kingdom and the European Union. O'Connor said the Government is working to ensure the potential of those agreements is realised.