Milk Is Souring U.S.-Canadian Trade Relations

International trade is rarely easy. Wine lovers need look no further than America's ongoing trade dispute with the European Union over aerospace subsidies. Up until the tariffs were temporarily suspended back in March, Americans were paying a 25 percent tax on wines from places like France and Spain because—get this—Boeing and Airbus are having a tiff.

For trade with our neighbor to the north, Canada, you'd think things would be easier—but, alas, squabbling over trade is the livelihood of people who studied much more boring things than the rest of us in college. And so, yes, this week, the United States formally requested a dispute settlement panel under 2020's United States-Mexico-Canada Agreement (the USMCA, often referred to as the "New NAFTA") alleging that the Canadian government has adopted measures meant to "undermine the ability of American dairy exporters to sell a wide range of products to Canadian consumers," according to the announcement.

"A top priority for the Biden-Harris Administration is fully enforcing the USMCA and ensuring that it benefits American workers," U.S. Trade Representative Katherine Tai stated. "Launching the first panel request under the agreement will ensure our dairy industry and its workers can seize new opportunities under the USMCA to market and sell U.S. products to Canadian consumers."

So what's our beef with Canada's dairy policy? The official panel request will tell you that Canada's dairy tariff-rate quota allocation measures are inconsistent with the USMCA's Articles 3.A.2.4(b), 3.A.2.6(a), 3.A.2.11(b), 3.A.2.11(c), and—you won't believe this one—3.A.2.11(e). But to get out of the weeds, the simple answer seems to be that the U.S. government believed the USMCA would help more American dairy get into Canada, and apparently, it hasn't quite lived up to its billing.

"International trade is key to economic growth and stability for our dairy farmers and processors. That's why additional market access into Canada is an important part of USMCA," Brody Stapel, president of the Edge Dairy Farmer Cooperative, said according to the site Wisconsin State Farmer. "Edge and our farmers appreciate USTR's commitment to holding Canada to the agreement and giving the U.S. dairy community greater export opportunities as intended."

Meanwhile, Mary Ng—Canada's Minister of Small Business, Export Promotion and International Trade—essentially stated that, yeah, they've read all those USMCA Articles and we think we're good. "We take our obligations under international agreements seriously. This includes those under CUSMA with the United States, our closest trading partner," she stated. "Under CUSMA, Canada agreed to provide some additional market access to the United States for dairy while successfully defending our supply management system and dairy industry. We are confident that our policies are in full compliance with our CUSMA TRQ obligations, and we will vigorously defend our position during the dispute settlement process. Our government will continue to stand up for Canada's dairy industry, farmers and workers and will continue to preserve, protect and defend our supply management system."

The dispute now heads to a panel that is expected to issue a report by the end of the year. From there, both sides can decide whether they'd like to continue to dispute the finding of the report—which could even lead to retaliatory tariffs. Watch out, Canadian winemakers: This has nothing to do with you so you could be in trouble!