New Zealand has escalated its ongoing trade dispute with Canada concerning dairy product access.

Todd McClay, New Zealand’s Trade and Agriculture Minister, said Wellington has triggered “mandatory negotiations” under the rules set out by the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

New Zealand and Canada are members of the CPTPP, a trade agreement involving 11 countries. Under the CPTPP’s dispute settlement process, negotiations must begin within 15 days following the notification.

In May 2022, New Zealand filed a complaint against Canada, arguing Ottawa’s implementation of dairy tariff rate quotas (TRQs) under their trade agreement violated the pact’s rules.

In September last year, a CPTPP panel said Canada’s administration of dairy quotas was inconsistent with its obligations under the CPTPP. As a result, New Zealand exporters were unable to fully utilise Canada’s 16 dairy tariff-rate quotas as priority access is given to domestic dairy processors.

Siding with New Zealand, the panel of arbitrators determined that Canada had not met its CPTPP obligations.

Despite the panel’s ruling, Canada has not adhered, pushing New Zealand to trigger negotiations.

Todd said: “New Zealand takes its obligations under trade agreements seriously. The CPTPP is one of the highest-quality agreements signed by a group of like-minded economies.

“Parties to the agreement understood the commitments they were making when the agreement was signed, and it is important that they honour them.

“As a matter of principle, the New Zealand government expects our trade partners to treat our exporters fairly and within the rules of our agreements. Canada is not doing that in respect to the dairy quotas that were negotiated and agreed with New Zealand.”

Commenting on the development, two ministers in Canada put out a joint statement. Mary Ng, Canada’s Export Promotion, International Trade and Economic Development Minister and Lawrence MacAulay, the country’s Agriculture and Agri-Food Minister, said: “Canada is very disappointed that New Zealand has decided to continue to challenge Canada’s dairy TRQ system. We have been through this before and have consistently and successfully defended our dairy sector and supply management from trade challenges under CUSMA and the CPTPP.

“The government of Canada will always defend our supply management, firmly standing up for Canada’s dairy industry, farmers and workers and the communities they support.”

In November last year, the US lost a trade deal spat over its access to Canada’s dairy market after a dispute settlement panel agreed Ottawa had not breached any trading commitments.

Canada had been accused by the US of breaking claims within the United States-Mexico-Canada Agreement (USMCA) via its dairy tariff-rate quota (TRQ) allocation measures.

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