Cheese exporters located in countries that are Canada’s trade partners should be able to sell directly to their customers, rather than be forced to sell to their competitors. Domestic dairy producers and processors should not be eligible for cheese TRQs because they have demonstrated that they do not wish to import cheese that competes with domestic products and they are clearly not the most likely persons to use it – two key principles committed to by Canada and enshrined in various trade agreements. Allocating the quota to those most likely to use it would increase the TRQ fill rates and keep them consistently high – which would benefit Canadian importers and consumers.
Canada’s imported cheese TRQ allocations should no longer be based on production or sales of domestic cheese. Local content preferences for Canadian milk and cheese are contrary to international trade treaty obligations.
All TRQ cheese allocation should be based on import performance. Import purchases rather than sales should be used to avoid double counting the same cheese in the supply chain. Several agreements envision quota allocations based on “import performance during the 12-month period immediately preceding the quota period”.
To enable new entrants in the cheese import business without TRQ to become eligible for TRQ, the first year of their allocation should be based on their preceding year volume of imported cheese sold into Canada. New entrants should be encouraged to build the next generation of specialty cheese importers.
Annual allocations should be based on usage in the previous year. To meet Canada’s commitment to maximize fill rates, allocation holders with a utilization rate of less than 95% in the previous allocation year should have their allocation adjusted downward by an under-utilization penalty for the following year.
No transfers should be permitted – but if they are, the amount should not be included in calculations of Actual Level of Use. The ICCC firmly believes that if cheese TRQ was allocated to those most likely to use it, there would be no need for transfers of cheese TRQs. However, if transfers are allowed, the amounts should not be included in calculations of Actual Level of Use. It is worth noting that the high levels of transfers (and the compensation schemes associated) are contrary to Canada’s international trade obligations to minimize transaction costs for traders.
The threshold of activity for all cheese TRQs should be the quantity of imports that results in an economically viable allocation of a container load. According to Article 5 of the WTO Bali Declaration, “tariff quotas shall be issued in economic quantities”. Cheese is a perishable product that often must be shipped long distances in a container. Regrettably, despite having apprised government administrators of the fact that a container load generally equates to 20,000 kilos, some importers have frequently received allocations of very low quantities, which are economically non-viable and often result in the allocations going unused. Ending this practice would increase the usage of allocations and ensure that Canada respects its trade obligations. Failing to do so leaves Canada in a state of non-compliance.