Trade agreements generally allow certain products to be imported into Canada without duty. The import of these products are managed through import permits known as tariff-rate quota (TRQ).
TRQ holders are allowed to import a specific amount of a certain product during a specified period. For supply managed products, like dairy, TRQ are administered through managed allocation. This means that the Canadian government decides which companies, groups or individuals receive the TRQ each year and can then import products with little or no duties.
While it would be logical to think that the companies that best know the market would be first in line to receive TRQ, this isn’t always the case. For example, when the government allocated CETA cheese TRQ in 2016, half went to retailers and distributors. This not only had significant consequences for Canadian cheesemakers, it destabilized the entire Canadian supply management system, resulting in:
- A loss of domestic market for Canadian cheesemakers and dairy producers
- A disruption of the Canadian wholesale price structure of cheese, resulting in a squeeze in dairy processors’ margin
- A weakening in the value of dairy processors and dairy farmers’ investments
- Increased power imbalances between retailers/distributors and processors
Right now, the government is currently conducting the second phase of a review of the allocation and administration of TRQ. Ensuring that these TRQ are allocated to dairy processors is a priority for the Dairy Processors Association of Canada.
TRQ should be allocated to dairy processors
Allocating TRQ to dairy processors is one of the tools available to mitigate economic harm to the Canadian dairy sector. The Canadian Government can help processors transition to their new market reality by allowing them to invest in the import market through TRQ.
Dairy processors who receive TRQ use them.
Canada’s dairy processors have a long history of fully utilizing their TRQ under WTO and, more recently, under CETA. 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.
When those who are best placed to use TRQ are given them, not only do Canada’s dairy processors benefit, so do Canadian consumers who are given greater choice.
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May 26, 2022 –
The United States has filed a second request for consultation on Canada’s dairy tariff-rate quota (TRQ) allocation mechanism announced earlier this month. The United States Trade Representative claims that Canada continues to restrict dairy in a manner that is inconsistent with the terms of the Canada-United States-Mexico-Agreement (CUSMA).
DPAC shares the government’s view that Canada has met its obligations under CUSMA and that its dairy TRQ allocation mechanisms are compliant with the agreement.
The USTR’s request on May 25 follows Canada’s announcement earlier this month that it had developed a new dairy TRQ allocation mechanism in order to comply with an earlier CUSMA panel decision. In our view, a key outcome of the last panel decision was the acknowledgement that Canada “has significant discretion in designing and implementing its allocation mechanisms.”
As was the case with the USTR’s first CUSMA challenge, DPAC will continue to work collaboratively with the Government of Canada as it defends its ability to implement a TRQ allocation mechanism that balances trade commitments and the stability of its domestic dairy supply management system.
Read more:
May 16, 2022 –
Today, the Government of Canada announced a new allocation mechanism for its dairy tariff-rate quota under the Canada-United States-Mexico Agreement CUSMA dispute resolution panel decision of January 2022.
The Dairy Processors Association of Canada (DPAC) has strongly voiced its opinion that Canada find a solution that ensures its TRQ allocation mechanism is fully consistent with the Panel’s decision, but does not go beyond what the Panel decision required. In DPAC’s view, the revised allocation mechanism announced today does just this.
Canada’s revised CUSMA dairy TRQ allocation mechanism eliminates, in conformity with the Panel’s decision, the ‘processors-reserved pool’. In its place, a single pool will be created whereby TRQ is allocated to processors and distributors on the basis of their production or sales.
This will allow our country to meet its trade obligations and provide additional market access to its trading partners, while also providing for the predictability in imports and strong domestic processing capacity required to support its supply management system.
DPAC thanks Minister Ng and her colleagues in government for their collaboration with the industry throughout the trade dispute. The allocation mechanism announced today provides stability to the supply management system and benefits for Canadian consumers.
April 1, 2022 –
Agriculture and Agri-Food Canada has launched the Supply Management Processing Investment Fund (SMPIF) to assist dairy, poultry and egg processors mitigate the impacts of CETA and CPTPP.
The $292.5 million program provides processors with non-repayable contributions up to $5 million to support investments in processing facilities that improve productivity and/or efficiency through the purchase of new automated equipment and technology. The Fund was announced as part of Budget 2021 and builds on the $100 million investment program launched in 2016 to address the impacts of CETA.
DPAC has long advocated for additional mitigation measures to be put in place to support dairy processors transitioning to new market realities created by recent trade agreements. It is estimated that these agreements, along with CUSMA, will result in annual losses of $300 million for Canada’s dairy processors by the time they are fully implemented.
At the launch of the Fund, DPAC Chair, Michael Barrett stated:
“Dairy processors welcome the announcement of the Supply Management Processing Investment Fund, which will support the additional investments and innovations necessary for Canada’s dairy processing sector to transition to new market realities resulting from additional market access concessions granted in trade agreements with Europe and Trans-Pacific countries. By supporting investments in processing plants, the Fund will help boost the competitiveness, productivity and long-term sustainability of the Canadian dairy industry.”
Highlights of the program can be found below. For more information about eligibility and funding opportunities, visit:
Backgrounder: Supply Management Processing Investment Fund (Agriculture and Agri-Food Canada)
The new, $292.5-million Supply Management Processing Investment Fund supports investments in processing facilities that improve productivity and efficiency through the acquisition of new automated equipment and technology.
Eligibility
Eligible applicants are processors of supply-managed commodities, including:
- Dairy processors
- Poultry Primary processors (chicken and turkey)
- Poultry Further processors (chicken and turkey)
- Hatcheries (broiler, egg-type and turkey)
- Egg graders
- Egg processors
Eligible activities
The program will focus its support on projects that:
Increase automation in processing facilities, such as:
- Automation or robotization of an existing production process
- Improvement to an already existing automated or robotic process
- Development of a new production line
- Implementation or improvement of an integrated management software
In addition to the above, projects may also include activities that will provide additional benefits, such as:
Improving environmental sustainability, such as:
- Equipment to reduce water and energy consumption
- Equipment required to treat waste water resulting from an increase in production
Responding to consumer demand concerning food safety and animal welfare, such as:
- Packaging that increases shelf life
- Processing equipment to reduce/control pathogen load
Note: The maximum AAFC contribution to an organization will normally not exceed $5 million.
Application Process
The program will use a two-step intake process.
A Project Summary Form will be used to screen the applicant’s and project’s eligibility, fit and readiness to apply for funding. Proposals that meet the program’s priorities and eligibility criteria may be invited to submit a full project application.
Applications will be accepted on a continuous basis until funding has been fully committed or otherwise announced by the program.
For more information about eligibility and funding opportunities, visit:
