RAGE BUILDS OVER USMCA RULING: American lawmakers and major industry groups are tearing into a landmark decision from the three-member USMCA panel on Friday that rejected a complaint that Canada has overly restricted U.S. dairy imports. “The panel’s decision leaves in place a status quo of Canadian dairy restrictions that is simply unacceptable. American farmers deserve a level playing field, and Canada must uphold both the spirit and the letter of its obligations under USMCA,” said Jason Smith (R-Mo.), chair of the House Ways and Means Committee, in a statement. Rep. Elise Stefanik (R-N.Y.) shared a similar sentiment on Friday, suggesting the move would position farmers in Upstate New York and North Country at a strategic disadvantage. Catch me up: The U.S. requested a panel in January to investigate if Canada’s market-share approach to deciding dairy import rules violated USMCA obligations. The Biden administration argued that Canada’s revised rules on import quotas barred importers, retailers and food service operators from gaining market access. The country uses tariff rate quotas to limit foreign dairy imports to protect the domestic industry in 14 categories including milk, cream, butter, skim milk powder and cheese. "Two of the three panelists found that Canada's measures do not breach of any of the USMCA commitments that the United States cited," said the Office of the U.S. Trade Representative in a statement on Friday, referring to the decision. Big biz in the fray: Under a system of tariff rate quotas, Canada has awarded the majority of volumes to domestic processors. That hits market access for U.S. exporters, hindering the efficacy of the revised version of the North American free trade pact, according to U.S. industry. “By allowing Canada to ignore its USMCA obligations, this ruling has unfortunately set a dangerous and damaging precedent,” said Krysta Harden, president and CEO of the U.S. Dairy Export Council. The National Milk Producers Federation similarly argued that the panel ruled in favor of trade obstruction. “We urge Ambassador Tai and Secretary Vilsack to look at all available options to ensure that Canada stops playing games and respects what was negotiated,” said president and CEO Jim Mulhern. Admin agrees: USTR Katherine Tai on Friday said she was “very disappointed” with the determination. She added that “despite the conclusions of this report, the United States continues to have serious concerns about how Canada is implementing the dairy market access commitments it made in the Agreement.” How we got here: The U.S. has launched two dispute settlement panels to fight Canada’s dairy TRQs since the USMCA came into force in 2020. The U.S. claimed victory in the first panel, launched and completed in 2021, after panelists ruled Canada breached its obligations under the deal by reserving TRQs for domestic processors. Ottawa gloats: International Trade Minister Mary Ng and Agriculture Minister Lawrence MacAulay issued a joint statement saying the Canadian government is “very pleased” with the panel’s conclusion and said it’s a positive development for “Canada's dairy industry and our system of supply management.” Washington’s not alone: Canada’s TRQ policy also faces criticism from trading partners like New Zealand, which initiated a formal trade dispute under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Its panel in September released its report concluding that Canada's policies were granting preferential access to domestic dairy processors. U.S. STEEL RETURNS TO HAUNT TRADE MINISTERS: European trade ministers are in town today, and the most closely watched item on their agenda is the (contentious) relationship between Brussels and Washington, especially when it comes to resolving a long-running metals dispute by the end of this year. In case you forgot: Without a deal to set up a green steel and aluminum club, Trump-era tariffs and EU counter-tariffs could snap back on Jan. 1. In addition, the two sides want to reach a deal on critical minerals to round the edges off of Washington’s massive splurge on its homegrown green industry. Brussels and Washington had set themselves an aspirational October deadline to reach a deal on turning against China’s heavily subsidized metal production and incentivizing partners to reduce their carbon emissions. And despite high expectations, a summit of EU and U.S. leaders ended with no results on either score in late October. U.S. officials have said they would not reimpose Trump’s tariffs even if there’s no deal by the end of the year, and instead would leave in place the tariff-rate quota arrangement that was agreed on two years ago. However, Biden has not yet issued a new executive order to do that; nor has the European Commission issued a new regulation that would delay retaliation on about $6 billion worth of goods scheduled to take effect in the new year. At the heart of it all are bigger questions about how to deal with China and differing views on the global trade system. The EU disagreed with the U.S. approach of erecting a steel and aluminum tariff barrier against “non-market economies” like China, preferring instead to deploy classic trade defense measures that respect WTO rules. Agree to disagree: “We agree on the objective, but we don’t see eye to eye on the path to get there,” summarized a European diplomat, echoing a widely shared mood among EU countries. “We need the Commission to find a path to avoid the retaliation of tariffs on either side of the Atlantic come January 1st.” And if there’s no solution, and the current tariff truces continues, “we need to convince the Americans to flexibilize more the quotas they’ve put into place,” said the diplomat, who was granted anonymity as they weren’t authorized to speak publicly. E-COMMERCE MORATORIUM SCOOP: TechUK is among a group of influential trade bodies pushing for members of the World Trade Organization to pursue a “high ambition” deal on e-commerce, despite the United States’ controversial decision to walk away from the talks. Customs duties: In a letter shared exclusively with POLITICO, the coalition led by TechUK writes: “Our collective economic development, growth, prosperity and employment depend upon cross-border access to technology and the movement of data in between countries.” The ask: As the last round of negotiations on the WTO’s Joint Statement Initiative on E-Commerce gets underway, the signatories want member countries to back a permanent moratorium on customs duties on electronic transmissions. Plus: They also call for an end to trade deals that discriminate against digital products or require companies to share source code when exporting digital services. And they want a clampdown on “discriminatory data localization policies.” High ambition: The signatories also say they “regret” the U.S. decision to withdraw support for the policies in October, adding that the “participating economies should continue to seek high ambition, including on data and source code, to deliver the first-ever high standard global baseline agreement on digital trade.” BIDEN EYES SUPPLY CHAIN STABILITY: President Joe Biden is convening the inaugural meeting of the White House Council on Supply Chain Resilience today and will announce nearly 30 new actions aimed at shoring up investment and access to critical goods, according to a briefing from White House officials. The president is expected to broaden the Defense Production Act to shore up investment and domestic manufacturing of essential medicines and announce new cross-government partnerships.
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