Canada, New Zealand settle trade dispute regarding supply management of dairy sector

Dairy cows graze outdoors in Saint-Pie, Que., on Friday, July 11, 2025. THE CANADIAN PRESS/Christinne Muschi

Canada and New Zealand have settled a trade dispute over Ottawa’s dairy-sector protections that regulate the cost and supply of products such as milk and cheese.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership includes certain quotas for countries to export dairy at preferred tariff rates into other member countries.

New Zealand successfully argued before a trade panel in September 2023 that Canada was unfairly limiting its quotas to protect domestic dairy processors.

The panel ruled at the time that Ottawa had some discretion over how it allocates its dairy quotas, but that some of its rules violate the trade deal. New Zealand threatened retaliatory tariffs after it said Canada failed to abide by the ruling.

On Thursday, both countries said they reached an agreement for technical changes.

In a statement, Trade Minister Maninder Sidhu and Agriculture Minister Heath MacDonald said the agreement only applies to quotas under the existing deal and “does not amend Canada’s market-access commitments.”

They said the “technical policy changes” to tariff-rate quotas primarily involve faster market access, increasing data transparency and a mechanism to reallocate underused quotas. They also enable an on-demand system for those with repeatedly underfilled quotas.

New Zealand’s trade department described the solution similarly.

“Importers will be able to access quota faster and more efficiently, making it easier to trade more dairy under Canada’s CPTPP quotas,” the department wrote, adding that this was “the first dispute New Zealand has taken under a free-trade agreement.”

New Zealand Trade Minister Todd McClay wrote in a statement that this week’s agreement will deliver the equivalent of up to $129 million in Canadian dollars “in export value for New Zealand dairy exporters.”

Dairy Farmers of Canada said it was “aware” of the agreement, and “expects that the Canadian government will continue to uphold our national food security and food sovereignty” after Thursday’s settlement.

“We understand that this will result in certain minor policy changes to Canada’s TRQ administration,” spokeswoman Lucie Boileau wrote.

The dairy dispute was the first taken up by any party under the CPTPP, a trade deal largely focused on Pacific Rim countries who say they agree on rules-based trade.

The U.K. joined that trade bloc last year, and the European Union has been looking at working with the grouping to counterbalance American and Chinese trade coercion.

This report by The Canadian Press was first published July 18, 2025