Canada-EU trade talks: The end of the road?
The trade talks between Canada and the European Union (EU), which began in 2009, finally ended on September 25, 2014 with an agreement in principle signed between Prime Minister Stephen Harper and José Manuel Barrosso, the EU Commission President. The Comprehensive Economic and Trade Agreement (CETA) when implemented will remove 98% of trade tariffs between Canada and the EU, and is Canada’s biggest trade agreement since the NAFTA (North American Free Trade Agreement) of 1994. A joint Canada–EU study has concluded that CETA could boost Canada’s income by $12 billion annually. The agreement will allow increased market access to 500 million EU consumers; however, what does this mean for farmers in BC? And is this actually the final agreement?
For a start, tariffs on fresh and frozen fruit and vegetable exports into the EU will be eliminated—currently EU seasonal tariffs are as high as 12%, and are a real barrier for Canadian exporters. The Agri-food Trade Alliance predicts an increase of $300 million in exports of Canadian fruit and vegetables as a result of CETA. Tariffs on salmon and Pacific halibut will also be eliminated. BC’s agricultural exports to the EU were worth an average of $36.7 million between 2010 and 2012, and can be expected to grow significantly.
The tariff free quota for the export of beef into the EU will be raised by 50,000 metric tons (MT); bison meat by 3,000 MT; and pork producers will also gain an extra 80,000 MT of quota. There will also be greater access of Canadian cereals and animal feed into the EU.
However, CETA also opens up Canadian markets to competition from subsidized EU producers; and there is significant opposition from some in the farming sector, such as the NFU. Higher imports of EU cheese into Canada could threaten local artisan producers. There are also concerns about restrictions on the use of common cheese names such as gorgonzola and fontina. The agreement allows existing Canadian producers to continue to use such names; however new producers must use terms such as “gorgonzola-like”, or “fontina style”. This issue is also likely to be a feature of the Transatlantic Trade and Investment Partnership (TTIP) negotiations between the EU and the US. Where the US Dairy Export Council (USDEC) is likely to oppose any restrictions on what it sees as commonly accepted food product names.
It is also unclear as to the extent to which beef and pork producers will benefit from increased quotas. Canada currently does not fill its existing quota for EU beef imports, and exports very little pig meat there also. Exports into the EU must meet strict EU regulations; which, for example, ban meat from cattle treated with growth hormones, and the use of Ractopamine (Paylean) in pork production. To fill the increased quotas, Canadian livestock farmers may have to significantly change their production methods, and more processors will have to gain approval to export meat to the EU. However, this may also spur increased availability of “natural” beef products on the domestic market.
Despite faltering economies in Western Europe, there is still fast growth in some of the former Eastern Bloc countries. According to the latest IMF World Outlook report, economic growth in developing and emerging Europe in 2014 will be 2.7%, compared to 0.8% within the Eurozone, and the East is where the greatest opportunities are likely to be for Canadian exporters. The market remains underdeveloped in the new member countries compared to Western Europe. Based on FAO figures, fruit consumption per capita among the former Eastern Bloc members is only 60% of that in the EU-15—there is also growing demand for more processed and value added products.
CETA has been a long time in coming, and much work remains. This includes the ratification of the final text by 28 national parliaments, along with the European parliament. Likewise in Canada, full ratification will also require some legislation being passed in provincial parliaments, as well as the Federal Parliament. This will be no mean feat, as Germany in particular has expressed reservations about clauses relating to investment protection, and opposition remains from trade unions and agricultural groups on both sides. Opposition is focussed on provisions to open up procurement contracts by local governments to competition, and fears that this may undermine “buy local” policies across the EU and Canada.
It is likely to take at least until 2016 before the agreement is finally implemented, and modifications to the agreement signed in September are possible. Many Europeans see the deal as a template for the much larger Transatlantic Trade and Investment Partnership (TTIP) negotiations with the United States, and are therefore keen to ensure that their interests are protected within CETA.
The final outcome could see greater trade between the US, Canada and the EU—a holy grail for many of those who advocate trade liberalization—or EU-Canada trade talks could again end in failure. The continuing TTIP negotiations are also likely to be long and complicated, with many disagreements over issues such as beef from hormone treated cattle, GM crops and agricultural support. With Canada as a significant trade partner for the US and EU, the current CETA agreement is possibly not the final word, but a template for something much bigger.