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USMCA Entered Into Force On July 1st, Including Elimination Of Canada’s Market-Distorting Supply Management Class 6 & 7 Pricing Programs And Affirmation Of More Than 30 Different Common Cheese Names Available For U.S. Producers When Selling To Mexico

Senators Prioritized Elimination Of Canadian Protectionist Pricing Programs And Increasing Market Access In Both Canada And Mexico; Say Both Countries Are Obligated To Operate According To The Deal 

Schumer, Gillibrand To Feds: Level The Field And Help NY Dairy Farmers Churn Up & Milk Profits

Continuing their tireless advocacy for New York’s hard-hit dairy farmers in the midst of the COVID-19 crisis, U.S. Senator Charles E. Schumer and U.S. Senator Kirsten Gillibrand today urged U.S. Trade Representative Robert E. Lighthizer and U.S. Secretary of Agriculture Sonny Perdue to ensure both Canada and Mexico are held accountable to their trade commitments under the United States-Mexico-Canada Agreement (USMCA), which entered into force earlier this year on July 1st. Specifically, the senators pointed out three harmful dairy trade practices, including Canada’s recent allocation of tariff-rate quotas (TRQs) for U.S. exports of several categories of dairy products, Canada’s Class 7 pricing program (Class 6 in Ontario) and lack of transparency in milk-pricing regulations, and the need for Mexico to translate its USMCA commitment of safeguarding more than 30 common cheese names for American products, into regulations.

“New York’s dairy farmers are the lifeblood of the Upstate economy, but unfortunately they have been squeezed by the economic effects of the COVID-19 crisis,” said Senator Schumer. “That is why I am calling on Ambassador Lighthizer and Secretary Perdue to do everything in their power to ensure that Canada and Mexico abide by their dairy trade obligations, allowing Upstate New York dairy farmers to freely sell their product – as agreed to in the new trade agreement with both countries, the USMCA. The trade deal entered into force two months ago, and there can be no further delays to ensuring our New York dairy farmers can sell their products, unimpeded by unfair trade barriers, into Canada and Mexico and churn up profits that mitigate the huge losses they have suffered this year.”

“Dairy is New York’s primary agricultural product and our rural economies depend on the survival of the industry, but poor implementation of USMCA provisions on dairy will harm our dairy farmers and make it even harder for them to recover from this crisis,” said Senator Gillibrand. ” Secretary Perdue and USTR Ambassador Lighthizer must hold our trading partners accountable and ensure equitable trading practices for America’s dairy farmers.”

Schumer and Gillibrand explained that under USMCA, Canada agreed to an expansion of tariff-rate quotas (TRQs) for several categories of U.S. dairy products. However, recently, it has come to the senators’ attention that Canada’s recently-released TRQ allocations weaken the intent of the USMCA and will prevent New York dairy farmers from fully benefitting from the agreement’s expanded market access opportunities.

Additionally, the senators said that under the new trade deal, Canada agreed to eliminate Class 6 & 7 pricing within 6 months. However, as Schumer revealed in June, Dairy Farmers of Ontario (DFO), which represents approximately 4,000 Canadian dairy farmers, requested that Ontario’s tribunal which provides an avenue of appeal on agriculture issues grant restricted access to DFO’s pricing regulations. The senators argued that with only a few months left until the USMCA six-month deadline to eliminate Class 6 & 7, the lack of transparency and timing of DFO’s request  in combination with the new TRQs, raises questions about whether or not Canada is seeking to circumvent its dairy commitments in USMCA.

The senators also noted that U.S. dairy farmers secured a major victory in the USMCA when Mexico affirmed a list of more than 30 terms for cheese that would remain available as common names for U.S. cheese producers when exporting to Mexico, but with uncertainty remaining over how Mexico will translate its commitment to protect these common cheese names into regulations, U.S. dairy farmers are in danger of losing out on the market share they spent years developing.

Senator Schumer and Senator Gillibrand’s letter to Ambassador Lighthizer and Secretary Perdue appears below:

Dear Ambassador Lighthizer and Secretary Perdue:

With the U.S.-Mexico-Canada Agreement (USMCA) now in effect as of July 1, we write urging you to ensure that both Canada and Mexico are held accountable to their dairy trade obligations in the agreement. It is of particular importance that dairy farmers in New York and across the country – many of whom are struggling as a result of this unprecedented economic crisis – fully benefit from the expanded market access opportunities and the elimination of unfair practices under USMCA.  

We have heard concerns from the New York dairy industry regarding Canada’s recent allocation of tariff-rate quotas (TRQs) for U.S. exports of several categories of dairy products, including milk, cheese, and yogurt. While the new tariff-rate quota commitments were intended to provide U.S. dairy producers with greater access to Canada’s dairy market, it is our understanding that Canada’s announced TRQs place U.S. producers at a disadvantage and are inconsistent with the market access provisions secured in agreement. Canada cannot be allowed to evade its trade obligations in order to protect its tightly-controlled dairy market and must fairly administer its TRQs as agreed to under USMCA.

Another key issue is ensuring the full elimination of Canada’s Class 6 and 7 milk price classification programs, which was a top priority of ours during the USMCA negotiations. As you are aware, Class 6 and 7 are market-distorting supply management programs that allow for the dumping of Canadian milk products onto the global market at artificially low prices, causing significant harm to New York dairy producers. While it was encouraging to see the elimination of these programs included in the final agreement, there are outstanding concerns from the U.S. dairy industry about Canada providing sufficient transparency on dairy pricing, which is critical for establishing a baseline against which the U.S. can evaluate Canada’s new post-Class 6 and 7 pricing policies, as well as with how Canada implements its USMCA dairy export surcharge commitments. There must be vigilant monitoring to ensure Canada complies with its commitment to eliminate these programs with full transparency, and in a manner that does not reproduce the programs’ harmful effects through different means.

Additionally, in a side letter accompanying USMCA, Mexico affirmed a list of more than 30 terms for cheese that would remain available as common names for U.S. cheese producers when exporting to Mexico. It is critical that our domestic producers continue to have the opportunity to sell products to consumers in Mexico using common cheese names and that New York dairy exporters do not lose the valuable market share they have spent years fighting for. As such, Mexico must translate its USMCA commitments into regulations in a way that ensures commonly-used cheese names specified in the agreement are respected.

Our hardworking dairy producers in New York and across the U.S. deserve to fully benefit from the provisions secured in USMCA. We therefore ask for your commitment to raise these concerns with your government counterparts in Canada and Mexico as soon as practicable and to take the appropriate enforcement measures going forward to ensure both countries’ dairy trade obligations are upheld.