The US has accused Canada of not meeting its obligation to open its dairy market to American producers and is seeking a second trade dispute settlement panel. This is a result of the long-standing tension between the two countries over Canada’s protected dairy industry.

Canada has had a system of tight control over dairy, eggs, and poultry production since the 1970s, restricting production and limiting imports through high tariffs. A government corporation, the Canadian Dairy Commission, sets the milk price annually that dairy processors pay to farmers.

In 2002, a WTO panel ruled that Canada breached its trade obligations through its dairy support, but Canada continues to maintain its dairy system to stabilize incomes for dairy farmers and political parties continue to support it.

However, some argue that supply management prevents Canada from becoming a dairy-exporting power and results in higher food prices. The US is upset because high tariffs are preventing U.S. dairy processors from increasing sales to Canada and the US Trade Representative’s Office alleges that Canada uses an unfair approach in determining quota allocations.