Jim Mulhern, president and CEO of the National Milk Producers Federation, is encouraged that the U.S. has filed an enforcement action against Canada.

The U.S. has filed an enforcement action under the U.S.-Mexico-Canada agreement to halt how Canada limits market access to U.S. dairy exports.

U.S. Dairy Export Council and National Milk Producers Federation applauded the U.S. Trade Representative’s announcement Wednesday that he will initiate official consultations with Canada to examine the administration of its dairy tariff-rate quota obligations.

The two organizations, with strong bipartisan backing from Congress, have long raised the alarm about the need to ensure USMCA is fully enforced due to Canada’s history of undermining its trade commitments.

“We knew from day one that enforcement would be key to bringing the intended benefits home to America’s dairy industry,” Tom Vilsack, president and CEO of USDEC, said in a press release.

Vilsack is President-elect Joe Biden’s likely nominee for secretary of agriculture.

“I applaud USTR for hearing our concerns and relying on our guidance to take this critical step to ensure that the agreement is executed in both letter and spirit,” he said.

USDEC and NMPF monitored Canada’s actions regarding its USMCA commitments and urged Congress and the administration to make enforcement a priority as soon as USMCA took effect.

Canada has distorted its TRQ administration to limit imports from the U.S. Earlier this year, USDEC and NMPF highlighted for USTR and USDA the inconsistencies between Canada’s dairy TRQ allocations and Canada’s USMCA obligations.

Shawna Morris, vice president for trade with USDEC and NMPF, explained the issue in an earlier interview with Capital Press.

Canada’s TRQs “are overly tilted toward Canadian dairy processors who in many cases have a disincentive to import competing product, particularly higher value products,” she said.

For instance, 80% to 85% of the quantities for all the dairy TRQ have been granted to Canadian dairy processors based on their market share, leaving a small amount left over for distributors and cutting out retailers from TRQ access, she said.

“It’s these latter two groups that we think have the strongest incentives to actually purchase U.S. dairy products, and we want to ensure they have a greater role in the process,” she said.

Enforcement of USMCA has been one of the dairy industry’s top priorities since the final agreement was announced, said Jim Mulhern, president and CEO of NMPF.

“Only when Canada is held fully accountable to its trade commitments will America’s dairy farmers be able to realize the full benefit of the provisions that the U.S. government worked so hard to secure,” he said.

Realizing the full benefits of those hard-fought wins relies on robust enforcement to ensure Canada and Mexico are held accountable to their trade commitments, the groups said.

“This is the critical first step, but more work may be needed to ensure Canada complies with its Class 7-related USMCA commitments as well,” Vilsack said.

Canada implemented its Class 7 milk ingredient pricing policy in 2017.

The program artificially lowered prices for Canada’s domestic milk ingredients to domestic processors to discourage imported ingredients, Morris said.