Canada and the European Union have inked a tentative trade deal that Canadian agricultural exporters say could be worth as much as $1.5 billion in annual sales.
Increased quotas and tariff elimination or phase-out over seven years offers unprecedented market access as long as commitments can be met to negotiate the end of existing EU technical barriers that have often thwarted theoretical quota access.
The meat sector expects to be the major beneficiary with projected sales opportunities of more than $1 billion — $600 million for hormonefree beef and $400 million for pork — once the deal kicks in two years from now.
The canola industry expects a doubling of sales to $180 million for the European biodiesel industry once tariffs are eliminated. The pulse industry said there is a potential for a dramatic increase in exports of pulse flour to the European market.
The grain industry also saw a silver lining, although direct grain exports will not be affected dramatically.
“I think for us it eliminates any chance of new tariffs or tariffs going up,” said Grain Growers of Canada president Stephen Vandervalk.
“But the big winner in this is hogs, pork and beef, and that means more sales to them of feed grain so that is an opportunity for us.”
The self-perceived loser in the deal is the Canadian dairy industry, which will see potential imports of European high-end cheeses double to 30,000 tonnes.
Dairy Farmers of Canada president Wally Smith predicted that the deal will put small artisan cheese producers in Ontario and Quebec out of business because of competition from subsidized European product. The result would be smaller markets for dairy farmers.
“This is unacceptable,” he said Oct. 17 after dairy leaders were briefed by the government on the details. “This potential deal is a loss for Canadian dairy farmers and industry.”
The Canadian government, which has cultivated a strong relationship with Canada’s protected dairy industry, disagreed.
In Brussels Oct. 18 at the signing of the agreement-in-principle, prime minister Stephen Harper said Ottawa will compensate dairy farmers if there is any evidence of lost sales.
Details of how the compensation would work were not available, and federal politicians suggested compensation would likely not be necessary because growing domestic cheese demand would more than cover the additional 17,000 tonnes of imports when the deal kicks in, likely in 2015.
Harper said the trade deal, four years in the making, is a win for supply management because Europe agreed to recognize the legitimacy of the system.
“For the dairy industry and more particularly for cheese producers, it is possible that there might be some losses in some parts of the domestic market on a temporary basis, and we committed ourselves to offering compensation that will fully take into account the unfavourable side effects,” he said.
While provinces must agree to the deal and have been involved in negotiations, Harper said the Quebec and Ontario governments have signaled they will support it.
Agriculture minister Gerry Ritz, who has been key in nurturing a relationship with the dairy industry, said the deal does not have to erode the trust dairy leaders have had in the Conservatives to defend them, despite initial objections.
He said the goal of the negotiations was to preserve the three elements of supply management: import controls that lend predictability to the system, production quotas and price setting.
“Every one of our pillars in the domestic system of supply management has been preserved, and that’s what we said we would do,” he said.
“Anyone who thought there wouldn’t be give and take in this negotiation were under-selling what goes on in negotiations, but we preserved the three pillars and that is what is important.”
National business groups applauded the deal and its promise of 80,000 jobs and more than $12 billion in new market access.
They argued that the increased 17,000 tonne cheese import into a market of more than 300,000 tonnes of production is small potatoes.
The Canadian Federation of Agriculture did not see it that way.
President Ron Bonnett said the deal violates the government’s promise of a “balanced position” between export promotion and protection of supply management.
While the CFA said it appreciated the promise of compensation, it noted that no details have been announced on how it would happen.
It estimated a loss of $150 million each year in dairy sales.
The government said that Canadian cheese makers can compete in the market opened for European cheeses.