The dispute involves Canada not meeting its requirements to New Zealand to open its market to our exports under the terms set by the CPTPP trade agreement. A panel of arbitrators ruled in favour of New Zealand last year, saying Canada’s blocking of dairy access meant it fell short of its CPTPP obligations.
It will be the first time any CPTPP country has used this type of negotiation to resolve a dispute. The dispute was initiated by the last Government, with bipartisan support.
Trade Minister Todd McClay said Canada has failed to comply with that ruling, forcing New Zealand to escalate to this next step. Negotiations must start within 15 days and should they fail, New Zealand could begin to apply tariffs to Canadian goods entering the country.
New Zealand is not able to take any additional action for 30 days after the first meeting, meaning tariffs or another response could come relatively quickly.
“There are a range of things we can consider. The best way forward is for Canada to either pay compensation to our exporters for their loss or to make changes that bring them within the rules, but we reserve the right to take action on behalf of our exporters,” McClay said.
Trade Minister Todd McClay says the dispute is partly about the principle of honouring trade agreements' terms. Photo / Mark Mitchell
McClay told the Herald New Zealand estimated it had lost “a couple of hundred million dollars worth of exports” over several years.
McClay said the dispute was not just about losses, however, but about the principle of honouring the terms of trade agreements. This was particularly important should New Zealand ever get into a trade dispute with another larger trading partner.
“It’s a matter of principle, Canada entered into an obligation when they signed the original TPP in New Zealand, it flowed through into the CPTPP and if they were not intending to honour it they shouldn’t have signed it,” McClay said.
“It’s not a significant amount of trade, but for a principled point of view for a country like New Zealand who always meets its obligations to others, it is incredibly important.”
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 of this year, his party would begin discussions with other parties to trigger a federal election.
Canada Trade Minister Mary Ng recently told website MarketWatchthe country’s system of tariffs and quotas aimed at protecting its dairy sector would be off-limits in future trade pacts.
This tense domestic situation in Canada suggests there is a strong likelihood of New Zealand being unable to resolve the dispute and therefore resorting to tariffs.
Former Trade Minister Damien O’Connor previously described the dispute to the Herald: “As part of the CPTPP agreement, we secured new dairy quota access accounting for 3.3% of Canada’s market - tens of thousands of tonnes per year in key dairy products for New Zealand’s exporters.
“The panel had found that New Zealand exporters were not able to fully utilise Canada’s 16 dairy tariff rate quotas and that Canada was granting priority access to its own domestic dairy processors,” 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.
