WTO Upholds Decision Against Canada's Dairy Export Scheme

October 14, 1999

The World Trade Organization (TWO) again has ruled that Canada's dairy export-pricing system is an export subsidy program and subject to limitations spelled out in a 1994 WTO agreement. It is a victory for U.S. dairy interests who had challenged Canada on its export policies.

A dispute settlement panel ruled in favor of the United States last March, but Canada appealed the verdict. The WTO Appellate Body issued its decision on Wednesday. The U.S. Dairy Export Council, The International Dairy Foods Association and The National Milk Producers Federation worked with the U.S. Trade Representative's office and USDA to challenge Canada's dairy export pricing and market access policies in the fall of 1997.

The WTO ruling upholds the dispute settlement panel's earlier decision on subsidies and removes the value restriction on milk Canadian consumers may bring into the country. However, it maintains Canada's restrictions on commercial fluid milk imports.

"It's frustrating that the appellate body let Canada off the hook on its market access obligations," says Janet Nuzum, IDFA vice president and general counsel. "However, the subsidy verdict affirms our confidence in the WTO system of disciplines on export subsidies. By clarifying what is and isn't a subsidy, this ruling sets an important precedent, deterring other countries from implementing similar systems."

Canada now has 60 days to inform the WTO how it intends to comply with the final decision. "We're looking forward to Canada's immediate implementation of the decision on subsidies," says Jerry Kozak, NMPF CEO. "We are disappointed that U.S. dairy farmers will not be able to sell milk directly into Canada. In order to continue enjoying high quality, low cost U.S. milk, Canadians must continue to drive to the U.S. to purchase it."