NZ Secures $157M Annual Boost as Dairy Dispute with Canada Ends Under CPTPP

New Zealand has reached a landmark agreement with Canada, ending a prolonged trade dispute over dairy market access under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The resolution is set to bring up to $157 million annually in export value to New Zealand’s dairy sector, marking a major victory for the country's trade interests.

Background to the Dispute

The dispute dates back to 2022 when New Zealand initiated formal dispute settlement proceedings against Canada, accusing it of failing to uphold its CPTPP commitments regarding dairy market access. Despite a dispute settlement panel ruling in New Zealand’s favour, Canada did not fully implement the necessary changes, prompting New Zealand to escalate the matter.

By 2024, the New Zealand Government, under mounting pressure from its dairy industry, notified Canada of possible retaliatory tariffs if compliance was not achieved. The move underscored New Zealand’s firm stance on upholding trade rules and protecting its economic interests under multilateral agreements.

Terms of the Settlement

According to Trade and Investment Minister Todd McClay, the newly reached agreement mandates Canada to make “commercially meaningful changes” to its administration of dairy quotas under the CPTPP framework. These include:

• Faster and more efficient access to quotas for New Zealand exporters.

• Reallocation of underutilized quotas, ensuring market openings are not left dormant.

• Penalties for importers who misuse quota allocations, reinforcing accountability within the Canadian distribution system.

These changes aim to eliminate administrative barriers that have historically restricted New Zealand’s dairy access to Canada, despite tariff-free quotas being available under the CPTPP agreement.

Strategic Implications

Minister McClay emphasized that the resolution represents a strong affirmation of the CPTPP's dispute resolution mechanisms and the rules-based international trading system. He remarked:

“Canada had failed to meet its obligation to New Zealand in respect of dairy access. Today’s agreement means they will now do so.”

He further stressed that the CPTPP is not merely a paper agreement but a powerful tool that “unlocks significant opportunities for all parties,” provided that its obligations are properly implemented.

Diplomatic Tone Despite Friction

Despite the months of tension, Mr. McClay expressed appreciation for Canada’s “constructive engagement” and described Canada as a “close and long-standing friend and trading partner of New Zealand.” His remarks highlight the delicate balance of asserting trade rights while maintaining strong bilateral relations.

Industry Response

While the statement did not include industry comments, analysts expect New Zealand dairy exporters—such as Fonterra and smaller producers—to welcome the improved access. Canada’s tightly regulated dairy market has long been a source of friction for exporters, particularly due to its quota-controlled system and protectionist policies.

The $157 million in potential annual value signifies more than just market access—it reflects confidence in multilateral enforcement and the ability of smaller nations like New Zealand to hold larger trading partners to account under international agreements.

Looking Ahead

With this agreement now in place, New Zealand is expected to monitor Canada’s implementation closely to ensure continued compliance. The success of this resolution could also serve as a precedent for addressing future trade disputes under the CPTPP and other similar trade pacts.