A settlement panel has rejected complaints from the U.S. Trade Representative’s office over how Canada is allocating its dairy import quotas.

It’s the second dispute resolution panel in three years to explore U.S. complaints that Canada is unfairly favouring processors over producers.

The findings of the first one, released in December 2021, found largely in favour of the U.S., although Ottawa still tried to frame it as a victory.

U.S. Trade Representative Katherine Tai said they requested a second panel because Canada had failed to adequately respond to the first.

International Trade Minister Mary Ng is framing the latest findings as vindication for Canada’s approach to import quotas.

"Canada is very pleased with the dispute settlement panel’s findings, with all outcomes clearly in favour of Canada," Ng said in a statement.

"This is good news for Canada’s dairy industry and our system of supply management."

Supply management, she said, provides stability to the market and supports producers with "fair returns" for their investments. "The government of Canada will also continue to work with processors and retailers to stabilize food prices," she added.

Ottawa says Canada’s dairy sector generated $8.2 billion in farm cash receipts and $17.4 billion in sales last year, supporting more than 70,000 production and processing jobs across the country.

The clash revolves around how Canada allocates its dairy tariff rate quotas, or TRQs — the quantities of certain dairy products that can enter Canada at lower duty levels under the terms of the U.S.−Mexico−Canada Agreement.

The first dispute settlement panel, launched in May 2021, largely agreed with the U.S. complaint that Canada’s strategy was a violation of the terms of the agreement, known north of the border as CUSMA.

Tai’s office felt compelled to seek a second panel after the first one changed little.

"Canada made commitments to the United States in the USMCA," Tai said at the time, "and the Biden−Harris administration is ensuring that they honour those commitments."

Disputes and disagreements have become a recurring feature of the USMCA since it became the law of the land in the summer of 2020.

Canada and the U.S. are together taking Mexico to task for energy policies they say unfairly favour domestic suppliers and threaten to undermine American efforts to jump−start the green energy industry and combat climate change.

And Canada and Mexico together claimed a significant victory in January, when a separate panel ruled against the U.S. interpretation of the rules that determine whether core automotive parts are considered to be of domestic or foreign origin.

The U.S. has been silent on whether it intends to comply with that decision.

This report by The Canadian Press was first published Nov. 24, 2023.

James McCarten, The Canadian Press