A photo taken on August 13, 2022 shows a herd of cows during milking time on a dairy farm near Cambridge in New Zealand's Waikato region, known for its fertile land and dairy industry. (PHOTO / AFP)

WELLINGTON - New Zealand on Wednesday welcomed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) panel's ruling in favor of New Zealand in its dispute against Canada over dairy quota.

The ruling is a significant win for New Zealand's primary sector exporters, Minister for Trade and Export Growth Damien O'Connor said on Wednesday.

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The panel found that Canada's dairy quota administration is inconsistent with its obligations under the CPTPP, a free trade agreement signed in 2018, involving 11 economies in the Pacific region.

The legal panel of three international trade law experts has upheld New Zealand's claims that Canada is not complying with the agreement's requirements to administer quotas in a manner that allows importers the opportunity to utilize the volumes fully

As part of the CPTPP agreement, New Zealand secured new dairy quota access accounting for 3.3 percent of Canada's market, which is equivalent to tens of thousands of tonnes per year of key dairy products for New Zealand's exporters.

The legal panel of three international trade law experts has upheld New Zealand's claims that Canada is not complying with the agreement's requirements to administer quotas in a manner that allows importers the opportunity to utilize the volumes fully and that Canada was granting priority access to their own domestic dairy processors. 

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"Canada was not living up to its commitments under CPTPP, by effectively blocking access for our dairy industry to upscale its exports," O'Connor said, adding New Zealand's dairy industry lost out on an estimated 120 million New Zealand dollars ($70.6 million) in revenue from the Canadian market in the past three years.

Wednesday's ruling will give exporters confidence and certainty that the mechanisms in place will ensure they receive the market access that all members agreed to, the minister said.

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The Dairy Companies Association of New Zealand Executive Director Kimberly Crewther said this legal dispute was the first of its kind under the CPTPP and underscored the importance of dispute provisions in trade agreements.

New Zealand has signed seven new or upgraded free trade agreements, including the CPTPP, since 2017.

The dairy industry is New Zealand's biggest export income earner, posting a record high of 26 billion New Zealand dollars ($15.3 billion) for the year ending June 2023, statistics show.