NZ invokes mandatory talks to settle dairy dispute
A dairy quota dispute between New Zealand and Canada is heading to mandatory negotiations.
This is even though NZ scored a landmark legal victory which forces Canada to put an end to protectionist policies that favour its dairy sector at the expense of NZ. Such policies are against the rules of the CPTPP - the trans-pacific trade agreement of which Canada and NZ are both signatories.
Under this agreement, countries are expected to open their markets to fellow members of the CPTTP, but despite three years of political pressure from the NZ Government to abide by the terms of the FTA, Canada has steadfastly refused to do so, thus breaking the rules of an agreement they signed up to.
It has done this by way of retaining a complex illegal quota system for dairy products which favours their own farmers and processors and effectively excludes exporters such as NZ. It’s estimated that Canadian intransigence over complying with the CPTTP has already cost NZ$120 million and will cost even more until they comply with the decision of an independent panel that ruled on the NZ case.
While Canada and NZ enjoy a close friendship and a positive relationship in most areas, the Ministry of Foreign Affairs and Trade (MFAT) decided to take legal action against them using provisions in CPTTP to settle disputes. This is the first time NZ has taken a case against an FTA partner and won.
While one might have expected Canada to do the honourable thing and sort the problem out immediately, officials believe Canada will drag the chain and take the full 15 months it has to open up their market to NZ dairy products.
MFAT’s deputy secretary trade and economic, Vangelis Vitalis, says NZ dairy exporters have not been able to benefit fully from the market access that was agreed. He says importers interested in buying NZ product have been unable to access quota and this represents a tangible cost to us and other exporting CPTPP Parties. He says the rules exist to address situations exactly like this.
“Putting it frankly, Canada’s approach to administering its dairy quotas is protectionist and undermines the market access agreed between CPTPP Parties. The Panel made it clear that all importers must have the opportunity to utilise Canada’s TRQs fully and Canada is not allowed to use administrative complexity to prevent importers accessing quota, or favour some importers over others. Canada must comply with the outcome, and it must not simply recraft its approach,” he says.
As well as sending a strong message to Canada, NZ’s win at the legal table is seen as precedent setting. And officials see this as sending a strong message to other countries with FTAs with NZ that we will not be bullied or ripped off by any country, regardless of its size or status. It is also seen as sending a strong message to farmers and exporters that MFAT and the Government is on their side and will act decisively in their interests if anyone breaks the rules.
