AUGUSTA – Maine’s Agriculture Commissioner Robert Spear this week praised an international agreement reached last week that will halt the importation of subsidized milk and milk products from Canada.

The World Trade Organization’s Appellate Body has confirmed an earlier WTO decision that concluded that Canada was providing illegal export subsidies to Canadian dairy processors, resulting in lost sales to American farmers and dairy processors of up to $35 million per year.

Although Maine is not importing Canadian dairy products – Maine actually has decreased its own milk production in each of the first three months of 2003 – the ruling will have an immediate impact on crisis-level milk prices as well as providing the U.S. dairy industry with a more level playing field in the international marketplace.

Spear said that the U.S. recently won a World Trade Organization case that ruled that Canada was continuing to provide illegal subsidies to its dairy industry. As a result of last week’s settlement, Canada has agreed to eliminate these subsidies in phases from May 1 to Aug. 1, said Spear.

“This is great news for American dairy farmers and processors. The playing field has been leveled,” said Spear. He said that a new farmer-led initiative to aggressively increase dairy exports to help leverage higher milk products will be greatly assisted by the ruling.

Spear also said that American milk and cheese will now replace what had been coming in from Canada, which further depressed milk prices nationally.

“Canada’s dairy subsidies have hurt U.S. producers and we are pleased that the WTO process has resulted in a positive solution,” said U.S. Agriculture Secretary Ann M. Veneman in a prepared statement. “This agreement will allow our producers to more effectively compete in the marketplace.”

Over a number of years, the United States has argued before the WTO that Canada’s dairy programs provided export subsidies to its dairy processors and farmers above the level that Canada committed to in the WTO. In December 2002, the WTO ruled in favor of the United States, confirming that Canada was continuing to provide illegal export subsidies with the sale of discounted milk to Canadian processors under its Commercial Export Milk program. Canada’s settlement of the case is also with New Zealand, which joined the United States in challenging Canada’s dairy regime in the WTO.

In 1995, Canada replaced its subsidy payments on all dairy exports, which were financed by a levy on dairy producers, with a new system. However, this system let Canadian processors buy lower-priced milk and use it to make cheese and other dairy products for export. Canada claimed the new system was no longer an export subsidy.

Three U.S. dairy organizations – the U.S. Dairy Export Council, National Milk Producers Federation, and International Dairy Foods Association – provided the impetus for the original challenge in 1997 by the United States and New Zealand governments and are applauding the agreement.