Dairy Groups Cautious on WTO Ruling

December 6, 2001

U.S. dairy organizations greeted a new World Trade Organization (WTO) ruling with cautious optimism after the WTO's Appellate Body decided that a compliance panel's analysis of Canadian government export subsidies required further analysis. Additional study is required to determine the full effects of the Appellate Body's ruling and subsequent steps for the U.S. dairy industry, the groups said.

In July, a WTO review panel determined that Canada's provincially run two-tier pricing system provided a subsidy that allowed Canada to exceed its WTO limits. Although the Appellate Body overruled a very specific technical aspect of the prior panel ruling favoring the United States and New Zealand, it did not give Canada a green light on its existing programs. Moreover, though the Canadians have been quick to claim victory in this case, nowhere in the Appellate Body's report does it state that Canada's export subsidy scheme is consistent with its WTO commitments, according to the dairy organizations.

While industry leaders said they regret that the Appellate Body was unable to reach a final decision, much of what the U.S. dairy industry hoped to achieve in this series of challenges has already been achieved. In its report released Monday, the Appellate Body clarified important new disciplines on Canadian export subsidies that build on the successes already won. In addition to inviting an opportunity for further information and analysis, the Appellate Body's decision provides another clarifying step in sustained efforts to seek the enforcement of Canada's WTO commitments.

The industry will consult with the U.S. government about the immediate next steps in this process, but it made clear its continuing commitment to combating trade distorting practices. The WTO dispute was never about eliminating Canada's dairy export subsidies or supply management, U.S. dairy officials say, but rather about enforcing the rights of the United States and New Zealand to be sure that Canada lives within its Uruguay Round commitments. This report will serve as a useful benchmark for using the processes available to reduce trade distorting subsidies and other practices.