CANADA - MEASURES AFFECTING THE IMPORTATION OF MILK

                                 AND THE EXPORTATION OF DAIRY PRODUCTS

                             Request for the Establishment of a Panel by the United States

        The following communication, dated 2 February 1998, from the Permanent Mission of the United States to the Dispute Settlement Body, is circulated in accordance with Article 6.2 of the DSU.

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        The Government of Canada is providing subsidies, and in particular export subsidies, on dairy products through its national and provincial pricing arrangements for milk and other dairy products without regard to the export subsidy reduction and other WTO commitments undertaken by Canada.  Specifically, the Government of Canada established and maintains a system of special milk classes through which it maintains high domestic prices, promotes import substitution, and provides export subsidies for dairy products going into world markets.  These practices distort markets for dairy products and adversely affect US sales of dairy products.

        In addition, although Canada committed under the Marrakesh Agreement Establishing the World Trade Organization to permit access to an in-quota quantity of 64,500 tons (product weight basis) under a tariff-rate quota for imports of fluid milk and cream, Canada has refused to permit commercial import shipments within the quota.  Instead, Canada is administering this tariff-rate quota in a manner that denies market access.