April 2, 2012

 

US demand open Canadian poultry market ahead of Trans-Pacific Partnership negotiations

 

The National Chicken Council (NCC) is pressing the Office of the US Trade Representative (USTR) to secure commitment from Canada to open its market for poultry soon in order to join the Trans-Pacific Partnership (TPP) negotiations.

 

Canada's supply management system for dairy and poultry limits imports and domestic production in order to drive up prices for Canadian farmers, to the detriment of US exporters to Canada. However, Canada has taken the position that it will not make any commitments on supply management reforms or other issues before it joins the TPP talks.

 

Canadian officials said they are committed to preserving the supply management system even if Canada were to enter the TPP. The Canadian government is under pressure from its poultry and dairy producers to protect the system, but they are not opposed to Canada's efforts to join the TPP.

 

U.S. and Canadian officials have been discussing the supply management system during bilateral talks on Canada's interest in joining the TPP.  Observers say that USTR is at least looking for assurances from Canada that it would be willing to open up its agricultural sector in significant new ways if it were to join the TPP talks.

 

The NCC demands are in addition to conditions set by other US groups on Canada joining. The National Pork Producers Council (NPPC) is opposed to Canada joining the TPP talks unless it renounces federal and provincial-level subsidies to the Canadian pork industry. US associations representing intellectual property rights (IPR) holders have also urged USTR to demand several steps to bolster IPR protections as a condition for Canada to join the talks.

 

Canada controls chicken imports through a global tariff rate quota (TRQ), which changes annually based on the previous year's domestic production. The TRQ is currently about 77,000 tonnes. Canadian companies are allocated parts of the global TRQ, and are free to contract foreign exporters who offer the best deal. These import shares are held by about 550 Canadian processors, distributors and others.

 

US exporters are said to supply the largest share of the TRQ, at about 55,000 tonnes, while Brazil follows with about 15,000 tonnes. One source said US exports to Canada under the chicken TRQ are valued at about US$116 million annually.

 

US chicken exporters face out-of-quota tariff that are prohibitively high, ranging from 238% for whole birds to 249% for chicken parts, making in-quota access extremely important for US exporters.

 

However, US export opportunities to Canada are not limited to the formal TRQ as supplementary import permits are issued for a number of reasons, including supply shortages.

 

For instance, as Canadian producers are bound by supply management and need to limit the number of chickens, they tend to grow larger birds to maximise profit. If processors in Canada need smaller birds, they can petition for special rights to import these smaller birds from the US and not have that count against the TRQ.

 

The Import to Re-Export Program (IREP) is also an exception to the TRQ for, under which import allocations are issued to Canadian poultry processors who will re-export the end product.

 

According to a 2011 report by the USDA's Foreign Agricultural Service (FAS), in 2010, 71,000 tonnes of chicken entered Canada under the global chicken TRQ in 2010, whereas a sizeable 73,000 tonnes entered under the IREP program.

 

In addition to the chicken TRQ, Canada maintains TRQs for other poultry products, including hatching eggs and chicks, turkey, eggs and egg products.