New Zealand has initiated dispute settlement proceedings against Canada over dairy quotas, the first time it has taken such action under a free trade agreement.

The manner in which Canada is implementing dairy tariff rate quotas is inconsistent with its obligations under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, New Zealand Trade Minister Damien O’Connor said in a statement. Many of Canada’s dairy tariff rate quotas remain unfilled, representing a tangible loss to New Zealand’s dairy exporters, he said.

“The value to New Zealand of this lost market access is estimated to be approximately NZ$68 million ($43 million) over the first two years, with this expected to increase year on year as the size of these quotas increase under CPTPP,” O’Connor said. “Our priority is to ensure that New Zealand exporters have meaningful access to the benefits negotiated under CPTPP, and that all parties fulfill the commitments they have made to each other under the agreement.”

The 11-member CPTPP, which came into effect at the end of 2018, is a free-trade agreement predominantly between countries in the Asia-Pacific region that together account for about 13% of global gross domestic product. China, Taiwan and the UK have applied to join.

New Zealand submitted its request for consultations to Canada earlier Thursday, O’Connor said. Canada has seven days to respond, after which the two parties will enter formal talks to try to resolve the dispute. If they fail to do so, New Zealand can request a panel to adjudicate the dispute.

“New Zealand has an excellent relationship with Canada, who are one of our closest partners in the world,” O’Connor said. “We have appreciated Canada’s engagement on this issue at different levels over a number of years and these proceedings will not come as any surprise to them.”