The document discusses a trade dispute between Canada, the US, and New Zealand regarding Canada's dairy pricing policies. Canada allowed dairy exporters to procure milk at lower prices compared to domestic milk prices. According to the complainants, domestic milk prices in Canada were approximately C$52.92 per hectoliter, while export processors paid between C$19.06 to C$36.86 per hectoliter. WTO panels ruled that Canada's pricing system constituted an illegal export subsidy by compensating producers for the lower export prices through higher domestic prices. The panels concluded Canada needed to bring its dairy pricing in line with its WTO commitments.

1. THE CANADIAN
DAIRY CASE
GROUP -2

2. Total Milk Production
Royal Dairy Commission
In-quota Production
Approx. C$52.92 Per
hectoliter
Domestic Processor
Over Quota Production
Approx. C $ 28.06 Per
hectoliter
Export Processor

3. Continued..
1995-96
25%
1996-97
25%
19997-98
25%
1998-99
25%
Market sharing Quota
1995-96 1996-97 19997-98 1998-99

4. INTRODUCTION
 THE ISSUE IN THIS DISPUTE WAS A
GOVERNMENT POLICY THAT ENABLED CANADA’S
EXPORTERS OF CHEESE AND CHEESE PRODUCTS
TO PROCURE MILK AT ADVANTAGEOUS PRICES.
 THE PRICE WHICH THE EXPORTERS PAID FOR
MILK WAS LOWER WHEN COMPARED TO THE
MILK PRICES PREVAILING IN CANADA’S
DOMESTIC MARKET.
 ACCORDING TO THE US, ONE OF THE
COMPLAINING COUNTRIES, THE AVERAGE MILK
PRICE IN THE DOMESTIC MARKET WAS C$ 52.92
PER HECTOLITER, WHILE CANADA ITSELF THE
DOMESTIC PRICE C$ 19.06 TO C$ 36.86 PER
HECTOLITER.

5. Continued..
Both the USA and New Zealand, another complaint
argued that such a government policy was not in
conformity with Canada’s subsidy commitments under
the Agreement on Agriculture.
The panel reporters of July 11, 2001 and December 20,
2002, found that the Canadian system ensured that
producers who sold milk at a lower price to export
processors were compensated by a higher domestic price.
The panels concluded that Canada should bring its export
subsidies in conformity with WTO Commitments.

6. Findings:
You are giving $ 52.92 to the producer in the domestic market sale.
(Subsidy??) i.e 44.7 million hectoliter * $ 52.92 (1998/99) –
AS per AOA : Payments on the export of an agricultural product
that are financed by virtue of govt. actions, whether or not a charge
on the public account is involved, including payments that are
financed from the proceeds of a levy imposed on the agricultural
product concerned or an agricultural product from which the export
product is derived.
Canadian govt. failed to explain that domestic market was market
driven.