CANADA – MEASURES AFFECTING THE IMPORTATION OF MILK AND THE EXPORTATION OF DAIRY PRODUCTS
Document: Second Recourse by New Zealand to Article 21.5 of the DSU Request for the Establishment of a Panel
Date: 6 December 2001
Document codes: WT/DS113/23
Complainant: New Zealand
Respondent: Canada
Third parties: Argentina, Australia, EU, Japan, Mexico, U.S.
Dispute stage: Mutually Agreed Solution
Agreements cited: Art. 3, 8, 9, 10  AgricultureArt. X:1  GATT 1994

CANADA – MEASURES AFFECTING THE IMPORTATION OF MILK
AND THE EXPORTATION OF DAIRY PRODUCTS
Second Recourse by New Zealand to Article 21.5 of the DSU
Request for the Establishment of a Panel
The following communication, dated 6 December 2001, from the Permanent Mission of
New Zealand to the Chairman of the Dispute Settlement Body, is circulated pursuant to Article 21.5
of the DSU.
On 27 October 1999, the Dispute Settlement Body (the DSB) adopted its recommendations
and rulings in the dispute Canada - Measures Affecting the Importation of Milk and the Exportation of
Dairy Products (WT/DS113). The DSB found that Canada was exporting subsidized dairy products
in breach of its export subsidy reduction commitments under the Agreement on Agriculture and
recommended that Canada bring its measures into conformity with the Agreement.
On 23 December 1999, pursuant to Article 21.3(b) of the Understanding on Rules and
Procedures Governing the Settlement of Disputes (the DSU), Canada and New Zealand agreed on the
reasonable period of time for implementation of the recommendations and rulings of the DSB
(). According to the terms of the 23 December 1999 agreement, as amended on
11 December 2000 (), the staged implementation process was to be completed by
31 January 2001.
On 19 January 2001, Canada circulated to all Members of the DSB its "final status report",
pursuant to Article 21.6 of the DSU ( /Add.6, WT/DS/113/12/Add.6). In that report,
Canada affirmed "that it will be in full complian ce with the rulings and recommendations of the DSB
by the conclusion of the implementation period" on 31 January 2001.
Taking the view that Canada failed to co mply with the above-mentioned recommendations
and rulings of the DSB by 31 January 2001 or since the expiry of that period, New Zealand requested
consultations with Canada on 2 February 2001 (WT/DS/113/15). Consultations were held on
9 February 2001, but failed to resolve the dispute. And, as a consequence of this failure,
New Zealand requested, on 16 February 2001, that the matter be referred to a Panel pursuant to
Article 21.5 of the DSU (WT/DS113/16).
The Panel was duly established and submitted its report to the parties on 5 July 2001
(WT/DS103/RW, WT/DS113/RW). The Panel conc luded that Canada had continued to act
inconsistently with its obligations under Articles 3.3 and 8 of the Agreement on Agriculture , by
providing export subsidies within the meaning of Article 9.1(c) of the Agreement on Agriculture in
excess of its quantity commitment levels specified in its Schedule for exports of cheese, for the
marketing year 2000/2001.

On 4 September 2001, Canada appealed certain issues of law covered in the Article 21.5
Panel Report, pursuant to Article 16.4 of the DSU, and filed a Notice of Appeal pursuant to Rule 20
of the Working Procedures for Appellate Review . The Appellate Body released its Report on
3 December 2001 (WT/DS103/AB/RW, WT/DS113/AB/RW).
The Appellate Body's Article 21.5 Report reversed some of the Panel's findings, but the
Appellate Body declined to rule on the consistency of the measure in question. Instead the Appellate
Body concluded that, in light of the factual findings made by the Panel and the uncontested facts in
the Panel record, it was unable to complete the analysis of the claims made by New Zealand under
Articles 9.1(c) and 10.1 of the Agreement on Agriculture. In its Report, the Appellate Body makes it
clear that its decision "does not amount to a finding that the measure at issue is WTO-consistent, but
simply that the Panel's findings are vitiated by error of law" (para 104). In such circumstances,
New Zealand continues to consider that Canada has failed to comply with the original
recommendations and rulings of the DSB.
As New Zealand highlighted previously (WT/DS113/16), in substitution for the dairy export
measures that have been ruled in contravention of Canada's WTO commitments, Canada has put in
place "new measures" for the export of dairy produc ts. In New Zealand's view, these new measures,
which are comprised in new provincial schemes that are designed to provide ongoing support to
Canadian dairy exports, equally involve the provision of export subsidies within the meaning of
Article 9.1(c) or Article 10.1 of the Agreement on Agriculture.
The effect of these schemes is that Canada is exporting subsidized dairy products without
counting these against its export subsidy reduction commitment levels. As a result, Canada continues
to be in violation of its obligations under one or more of Article 3.3, Article 8, Article 9.1(c),
Article 10.1 and Article 10.3 of the Agreement on Agriculture.
In particular, New Zealand notes the following acts, statutes, orders, regulations, directions,
correspondence, and actions:
Federal and Inter-Provincial
(a) Canadian Dairy Commission Act;
(b) Dairy Products Marketing Regulations, as amended, including those enacted pursuant to the
Canadian Dairy Commission Act (in effect on 13 December 2000 and published in Part II of
the Canada Gazette on 3 January 2001);
(c) Agricultural Products Marketing Act, and amendments to provincial milk orders issued under
the Agricultural Products Marketing Act granting authority to regulate marketing in
interprovincial and export trade of milk (in effect on 13 December 2000 and published in Part
II of the Canada Gazette on 3 January 2001);
(d) Comprehensive Agreement on Special Class Pooling, as well as Annexes, Addenda, and
Schedules thereto;
(e) National Milk Marketing Plan, as well as Appendices and Amendments thereto;
(f) Interprovincial Comprehensive Agreement on Special Class Pooling;
(g) operations of the Canadian Milk Supply Management Committee;

(h) directions to the Canadian Dairy Commission by the Minister of Agriculture and Agri-food
under Section 11 of the Canadian Dairy Commission Act (in effect on 13 December 2000 and
published in Part II of the Canada Gazette on 3 January 2001);
(i) official communications from provincial Agriculture Ministers to the Federal Minister of
Agriculture and Agri-food outlining the new mechanisms, as per Canada's note of
1 December 2000 "Responses to Questions posed by New Zealand and/or the United States
regarding Provincial Dairy Export Mechanisms", heading 4;
(j) provincial export mechanisms adopted in the provinces of Prince Edward Island, Nova Scotia,
New Brunswick; Quebec, Ontario, Manitoba, Saskatchewan, Alberta and British Columbia as
identified and described in materials provided by Canada to New Zealand in consultations
held under the 23 December Implementation Agreement;
Prince Edward Island
(k) Natural Products Marketing Act, Prince Edward Island Milk Marketing Regulations
Amendment (as published in the Royal Gazette on 30 December 2000), and Contractual
Commercial Export Activity Order, Board Order MMB00-02;
Nova Scotia
(l) Dairy Commission Act: Section 5(2) of Schedule 2 "Regulations Respecting Milk
Production"; Section 3(15) of Schedule 8 "Regulations for Specified Areas"; Schedule 13
"Regulation Respecting Contracted Exports of Dairy Products";
New Brunswick
(m) New Brunswick Milk Marketing Board, Exemption Orders Nos. 6, 8 and 11 of
1 August 2000;
Québec
(n) Government of Québec, Order in Council 1408-2000 (6 December 2000) as published in the
Gazette Officielle du Québec on 3 January 2001; Gazette Officielle du Québec, 9 August
2000, no. 32 ; Décision 7140, Régie des marchés agricoles et alimentaire; Décision 7111,
producteurs du lait Quebecois and Agropur, Group Lactel and the Conseil de l'industrie
laitiere du Quebec;
Ontario
(o) Regulation 179/00;
(p) DFO Milk General Regulation 09/00 and 15/00;
(q) DFO Milk Pricing Regulation 08/00;
Manitoba
(r) Export Contract Milk Exemption Order;
Saskatchewan
(s) Milk Control Regulations;

Alberta
(t) Dairy Board Regulation and Amendment Regulation, O.C. 260/2000;
(u) Alberta Contracted Export Milk, Clarification of Operating Procedures;
British Columbia
(v) British Columbia Milk Marketing Board Regulation and Consolidated Order.
As indicated above, the Appellate Body's Article 21.5 Report did not rule on the consistency
of Canada's new measures. New Zealand continues to believe that Canada has failed to comply with
the original recommendations and rulings of the DSB.
Accordingly, there continues to be "a disagreement as to the existence or consistency with a
covered agreement of measures taken to comply with the recommendations and rulings of the DSB"
between Canada and New Zealand, within the te rms of Article 21.5 of the DSU. New Zealand
therefore requests, pursuant to Article 21.5, that this matter be referred to the original Panel.