26 June 2002

Canada To Appeal WTO Dairy Ruling

Canada will appeal today's ruling of the World Trade Organization (WTO) Compliance Panel on dairy that Canada's approach to commercial export milk transactions is not WTO-compliant.

The Panel concluded that Canada, through commercial export milk is providing export subsidies in excess of its WTO obligations.

"We are disappointed by the decision," said International Trade Minister Pierre Pettigrew. "Last year, the WTO Appellate Body provided strong guidance on how our export practices should be reviewed. We have serious concerns that these directions were not reflected in the report. We will
carefully analyze this decision and mount the best possible case for an appeal."

"Canada disagrees with the Panel's conclusion and will appeal this decision," said Lyle Vanclief, Minister of Agriculture and Agri-Food. "The challenge doesn't affect Canada's right to operate a domestic supply management system. We are examining the Panel's report carefully to prepare our appeal, and will continue to work closely with the provinces and industry stakeholders as we have done since the inception of this dispute."

Canada will notify the WTO of its intent to appeal in due course.

The WTO dairy dispute began in March 1998, when the United States and New Zealand first launched a formal complaint with the WTO to challenge Canada's dairy export system. The United States and New Zealand argued that Canadian dairy exports benefited from export subsidies under the rules of the WTO Agreement on Agriculture and were subject to Canada's WTO export subsidy reduction commitments.

In 1999 the WTO ruled in favour of the United States and New Zealand, and since that time, Canada has changed the way milk destined for exported dairy products is marketed. Based on the ruling, and following consultation with
the provinces and industry, federal and provincial governments have removed themselves from export activities and exported milk is now bought and sold in accordance with market demands. Despite these changes, the United States
and New Zealand have continued to challenge Canadian dairy export practices.