G/STR/Q1/CAN/17  
 
16 October 2018  
(18-6457) Page: 1/2 
Working Party on State Trading Enterprises  Original: English  
 
  
STATE TRADING  
QUESTION S FROM THE EUROPEAN U NION  
REGARDING CANADA'S NEW AND FULL NOTIFIC ATION1 
The following communication, dated 15 October 2018, is being circulated at the request of the 
Delegation of the European Union . 
 
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Question 1  
 
Could Canada please clarify the role of the Canadian Dairy Commission as regards "providing the 
technical support necessary for the operation of Canada's milk supply management system" and 
"administering revenue pooling agreements on behalf of the industry " (paragraph III -A, page 2 of 
the notification)? During the period 2015 -2017 covered by the notification, Milk Class 7 was 
introduced in several provinces of Canada, and the EU understands that the prices for Milk Class 7 
are set by the Canadian Dairy Corp oration. The EU expresses concerns that the new Milk Class 7 has 
a cross -subsidisation effect for exports (through the high internal prices for dairy fats), and an import 
substitution effect. The EU would like to understand the role of the Canadian Dairy C ommission in 
the operation of Milk Class 7. In particular, can Canada please explain whether the role of Canadian 
Dairy Commission is the same as it is in the management of the "Special Milk Classes" 5a, 5b, 
and 5c? If not, how is this difference working i n practice?  
 
Question 2  
 
Does Canada agree that its milk class system, although allegedly a private mechanism, could only 
exist by virtue of a milk quota system imposed by the government of Canada and the Provinces and 
that the price levels on products pro duced within milk class 7 only is possible due to the higher prices 
paid for other milk classes to the farmers?   
 
Question 3  
 
Can Canada please explain how milk class 7 is not in breach of Article 20 of the Nairobi Decision 
(circumvention of export subsid ies ban by an STE)? EU acknowledges that CDC is not the exporter 
and no direct subsidies are paid, however these prices are possible only because of the Canadian 
dairy quota system, which is imposed by the Canadian government. Therefore, export with such l ow 
prices is only possible "by virtue of governmental action." This falls under the definition of export 
subsidy of Article 9.c of  AoA. Therefore, EU would like to know how C anada justifies that milk 
class 7 is not a subsidy, and that CDC does not breach A rticle 20 of the Nairobi Decision?  
 
Question 4  
 
Could Canada please explain the differences between the "Average representative domestic sales 
price" of 6.66 and 6.50 CAD/kg in Table I for imports (page 5 of the notification), and the "Average 
representati ve domestic sales price" of 10.57 and 10.62 CAD/kg in Table II for exports (page 6 of 
the notification)? According to the corresponding footnotes, two different definitions have been used 
                                                
1 G/STR/N/17 /CAN. G/STR/Q1/CAN/17  
 
- 2 - 
 
  for the same notion. Could Canada please explain why two different s ets of representative domestic 
sales prices have been used?  
 
Question 5  
 
Under the United States - Mexico - Canada Agreement, Canada has committed to eliminate milk 
classes 6 and 7, and to ensure that products currently in those classes be reclassified and associated 
to prices established based on end use. Can Canada explain how it intends to implement those 
commitments, and how that change will affect, if at all, Canada’s replies to the above questions?  
 
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