New Zealand has "achieved a decisive win" in its trade dispute with Canada, one of the country's top trade officials says, after a panel found the North American nation has been administering dairy tariff rate quotas (TRQs) in breach of a major trade deal.
Disagreements between New Zealand and Canada were escalated last year when Aotearoa called for a panel to hear the dispute. A three-person panel heard arguments in June.
New Zealand raised concerns about how Canada has been implementing its dairy 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.
Trade Minister Damien O'Connor on Wednesday morning welcomed the panel ruling in favour of New Zealand's arguments.
"Canada was not living up to its commitments under CPTPP, by effectively blocking access for our dairy industry to upscale its exports. That will now have to change," he said.
"This is a significant win for New Zealand and our exporters. Our dairy industry lost out on an estimated $120 million in revenue from the Canadian market in the past three years."
He said the panel's ruling will give "exporters confidence and certainty that the mechanisms in place will ensure they receive the market access that all members agreed to".
"As part of the CPTPP agreement, we secured new dairy quota access accounting for 3.3 percent of Canada’s market - tens of thousands of tonnes per year in key dairy products for New Zealand’s exporters."
He said the panel found that New Zealand exporters were not able to fully utilise Canada's 16 dairy tariff rate quotas and that Canada was granting priority access to their own domestic dairy processors.
The Ministry of Foreign Affair's deputy secretary, trade and economics, Vangelis Vitalis, said: "Putting it frankly, Canada’s approach to administering its dairy quotas is protectionist and undermines the market access agreed between CPTPP Parties," he said.
"The Panel made it clear that all importers must have the opportunity to utilise Canada’s TRQs fully."
Vitalis said Canada wasn't allowed to use "administrative complexity" to prevent importers from accessing a quota or to favour some importers over others. Canada also couldn't give priority access to domestic dairy processes.
"New Zealand dairy exporters have not been able to benefit fully from the market access that was agreed," he said.
"Importers interested in buying NZ product have been unable to access quota. This represents a tangible cost to New Zealand, and other exporting CPTPP Parties. The rules exist to address situations exactly like this."
Vitalis called this a "decisive win" for New Zealand and Canada would have to change its administration of quotas.
Canada was found to not breached its obligations in "two minor claims", Vitalis said, while the panel decided to not make findings on two other claims as they had been addressed through other findings.
It was the first dispute brought under the CPTPP.
"The manner in which the dispute has been conducted from start to finish demonstrates the efficiency and effectiveness of the CPTPP’s dispute settlement rules. This is a success for CPTPP and the rules based international trading system."
Vitalis said New Zealand and Canada continue to "share a close and strong friendship".
"Even close friends have disagreements from time to time, and the dispute settlement processes under CPTPP exist to provide a forum for resolving them."
Former Prime Minister Jacinda Ardern last year said she told her Canadian counterpart Justin Trudeau "to his face" that New Zealand would escalate the dispute.
"I think it would be unusual that given the amount of contact we have for me not to raise the issue. Our relationship with Canada means I can be very forthright," Ardern said.
She told Trudeau that "we were at an impasse" and she didn't "see any reason why we should have officials continue a back and forth". She said she didn't want to "waste time".
"If we can speak frankly as leaders and know we are between ourselves not going to be able to resolve it, it was time to escalate. That's what we've done."
