At issue is the way tariff rate quotas are applied under the CPTPP.
Currently, the way the CPTPP is being applied in Canada requires NZ dairy to be purchased by several Canadian dairy processors who already have contracts for dairy with Canadian farms under the country’s supply management system.
This is an interventionist way of protecting Canadian dairy farms by issuing farmers with licences to produce dairy, whilst restricting imports from those who might undermine those producers.
New Zealand thinks this is an unfair application of the rules of the CPTPP, which was designed to increase market access rather than reduce it.
The Canadian statement said their Government was confident its “new policies fulfil Canada’s obligation to eliminate the non-conformity identified by the panel”.
Jacobi noted the decision of Canada to use the words “non-conformity” could be read as an admission from Canada that existing policies did not align with the CPTPP.
New Zealand had a right to challenge that non-conformity, and as a last resort, impose tariffs equivalent to the harm done by Canada’s protectionism.
Canada’s problem is primarily a domestic one. Dairy access is a controversial topic in Canada, with Prime Minister Justin Trudeau’s Liberal Government currently being propped up by a Bloc Quebecois, who are demanding strict dairy controls as a condition of support.
Bloc Quebecois leader Yves-Francois Blanchet told the Guardian that if his party is not given legislated dairy protections by October 29, his party would begin discussions with other parties to trigger a federal election.
Jacobi said Canada agreed to open its market as part of signing the deal.
“They accepted there would be more imports of New Zealand dairy products to Canada that is what they agreed,” Jacobi said.
Jacobi said New Zealand was likely taking a strong stance on the issue because of the principle at stake, rather than the amount of lost trade. He said that it would be a bad look for Canada and the CPTPP if relations broke down to the point of imposing tariffs.
“If we broadcast to others with whom we have trade agreements that we are a pushover that is going to impair our access in markets which are equally important,” Jacobi said.
Jacobi said the era of big new trade deals like the CPTPP was over and New Zealand’s trade strategy needed to pivot to “get the max value out of the trade deals we’ve got”.
“That is particularly the case in the dairy industry, which is still the most protected around the world,” he said.
Thomas Coughlan is deputy political editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.
