A TRQ is an import license. Whoever holds a TRQ is allowed to import a specified amount of a certain product over a specified period of time, as per the terms of that TRQ. Simple as that!
Why is this important?
In the past several years, the Government of Canada has signed three major trade deals: the Comprehensive Economic and Trade Agreement (CETA) with the EU, the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) with several pacific nations, and the Canada-United States-Mexico Agreement (CUSMA). Cumulatively, these trade agreements have exposed 10% of Canada’s supply-managed dairy industry to subsidized, foreign competition.
What challenges does trade present?
Canadian dairy is supply-managed. Supply management is a regulatory policy which ensures supply does not exceed demand, and is predicted on the principles of stability and predictability. Any increase in market access for foreign products undermines those principles, and consequently, the system.
Could exports of Canadian dairy products offset the losses caused by foreign imports?
Canadian dairy, as a supply-managed industry, is not built for exports: it is designed to ensure Canadian supply meets Canadian demand. Any imports therefore represent irrecoverable market share loss for the domestic industry.
So when the government signs a new trade agreement, dairy processors get the TRQ?
Not always! Because TRQ constitute a business opportunity, other stakeholders lobby for a chance to secure them for themselves. These other stakeholders, however, experience no economic harm as a result of market access concessions. Where dairy processors see TRQs as loss mitigation, others see windfall profits.
So why should dairy processors have TRQ?
TRQ are an effective tool to mitigate economic harm to Canadian dairy processors at no cost to the taxpayer. It is important to remember that they are not a complete solution; but, by simply allowing processors to invest in the import market through TRQ, the Canadian Government can help those processors transition to their new market reality.
So we allocate TRQ to dairy processors. Will the processors actually use them?
Yes! Canada’s dairy processors have a long history of fully utilizing their TRQ under WTO and, more recently, under CETA. The industry’s commitment to supply management is not in question. Nevertheless, when market access concessions are made, Canadian dairy processors have always partaken in international trade in good faith. They have a proven track record as serious importers, with deep expertise and knowledge of consumer preferences and trends..