Some of the Conservative government’s promises aimed at satisfying Canadian dairy producer complaints could raise the ire of the European Union, Canadian officials were told recently.
The EU is already locked in a battle with Ottawa over a 2006 budget decision to give tax preference to Canadian-produced wine made from domestic grapes. The Europeans say the decision discriminates against imported European wine, contrary to a wine and spirits agreement signed in 2004.
Now add to that some potential trade irritants in the dairy sector.
European Commission director general for agriculture Michael Erhart was in Ottawa in late April in part to let Canadian officials know that recent dairy policy announcements are causing concern in Brussels.
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Specifically, the EU is watching the fallout from two government promises to Dairy Farmers of Canada:
- Canada will use World Trade Organization Article 28 to negotiate a new tariff to control increases in imports of dairy-displacing milk protein concentrates. Countries that export milk protein concentrates to Canada can claim compensation for lost potential sales.
- The Canadian Food Inspection Agency will establish rules on what ingredients, and in what proportion, are allowed in cheese sold in Canada. It is an attempt to prevent manufacturers from creating cheese products that use cheaper imported substitutes to avoid using more expensive Canadian dairy ingredients.
Federal agriculture minister Chuck Strahl wants the CFIA to codify “compositional standards” for cheese by next year. A code of accepted cheese compositional standards has long been a goal of the dairy farmer lobby, aimed at stemming declining demand for their products as unregulated substitutes are imported.
Erhart told Canadian officials that both promises could affect European dairy exports to Canada and are being watched.
New Zealand is the main source of milk protein concentrate imports into Canada but European companies also are in the trade. Canada has started negotiations within the WTO on establishing a new tariff and the EU has let it be known it will be demanding compensation, once the potential impact and financial loss have been calculated.
The EU also has made it clear that if CFIA’s cheese “compositional standards” code creates problems for European cheese products now coming into Canada, it will be challenged as an unwarranted trade barrier.
Under supply management protections, cheese imports are limited to a 20,000 tonne quota. European cheese imports fill two-thirds of the quota, worth tens of millions of dollars.
