Canadian dairies get significant control over imports under TPP

TORONTO (Reuters) – Canada will give local dairy processors significant control over imports under a new trade deal with Pacific countries that opens the sheltered industry to further competition, according to a notice published by the federal government, which drew criticism from Canadian retailers.

New quotas created by the Comprehensive and Progressive (NYSE:) Agreement for Trans-Pacific Partnership (CPTPP) are similar to those meant to give U.S. dairy and poultry farmers new access to Canada under the new North American trade agreement, USMCA.

The rules, which lay out who can receive quotas to import some agricultural products duty-free from countries that ratify the deal, vary between products, but in some categories nearly all the quotas are earmarked for Canadian processors. One quota covering “cheeses of all types” reserves 85 percent for processors, leaving 15 percent for distributors.

The announcement was praised by Saputo Inc (TO:), one of Canada’s biggest processors, which noted in a statement on Tuesday that processors will get a “significant portion” of the quotas.

“We are confident this will be favourable for consumers and will assist dairy stakeholders in maintaining value in the dairy sector in Canada,” said the company in a statement on Tuesday.

It is not the first time Canada has taken the unusual step of giving local producers special rights to import, easing the pain of new competition.

Karl Littler, spokesman for the Retail Council of Canada, said the allocation looks like a subsidy.

“We find that, obviously, to be less than ideal, given that people buy their cheese from us, not from the producers,” he said.

In 2017, a last-minute dispute over how Canada would allocate cheese import quotas sent the country back into negotiations with the European Union over the Comprehensive Economic and Trade Agreement.

European dairy farmers and cheesemakers were unhappy with a plan to give Canadian cheesemakers 60 percent of the new quota. In a compromise, they received 50 percent instead. In the first full year with the new quotas in force, Canadian imports have been sluggish.

In the notice, federal officials promised a “broad-based stakeholder engagement exercise” in the new year to review all of Canada’s import quotas, as new trade deals expand their use.

“The review exercise will ensure that TRQ (tariff rate quota) allocation and administration continue to be conducted in an efficient and effective manner,” said the notice.

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