August 24, 2017
Canada looks to Asia, FTA with EU as NAFTA enters tense renegotiation
By September this year, Canada's beef could bypass heavy tariffs as it enters Europe, though not without challenges.
The development will materialise once the Comprehensive Economic and Trade Agreement (CETA) between Canada and Europe comes into force.
Seen as the EU's most comprehensive trade deal, CETA aims to facilitate the EU's trade with Canada by abrogating tariffs on more than 98% of European exports entering the country. The FTA, which will be implemented on September 21, will allow more than 60,000 tonnes of duty-free Canadian beef into Europe.
The elimination of tariffs will happen in phases. "When CETA comes into force, almost 94% of EU agricultural tariff lines will be duty-free," a CETA document states. "Seven years later, that number will rise to over 95%."
The document also reveals that the FTA "will give Canadian agricultural products, including a specified amount of Canadian beef, pork and bison, preferential access to the EU market and a competitive advantage over producers from other countries that do not have a free trade agreement with the EU."
With the FTA, the EU stands to become a $600 million market for Canadian beef annually, the Canadian Cattleman's Association said. The figure is an increase from current levels of between $6 million to $10 million yearly.
Additionally, a fully implemented CETA may be worth about "one and a half billion dollars" due to increased Canadian exports, Brian Innes, president of Canadian Agri-Food Trade Alliance (CAFTA), estimated.
Still, the early days of FTA is not expected to be smooth sailing; issues concerning food safety recognitions of beef and pork remain unresolved and could impede the meats' full access to the European market. Innes pointed to inconsistencies in the way Europe looks at particular provisions, which could leave some Canadian beef and pork processing plants unable to fulfill requirements by the time CETA starts.
According to Ron Davidson, director of international trade, government and media relations at the Canadian Meat Council, health mark labeling and antimicrobial intervention are the sticking points.
Furthermore, Canadian beef have to be obtained from animals raised without the injection of hormones. Meats are also to be to be processed in a certain manner at packing facilities.
About 5,000 producers are therefore required to produce beef without hormones, John Masswohl, director of government and international relations with the Canadian Cattlemen's Association, said.
Nevertheless, Innes is upbeat about CETA's benefits that Canada would enjoy.
"We don't see (one and a half billion dollars) coming on day one by any means but over time, this could be very significant for Canadian agriculture," he commented.
Davidson also believed that, while the matter with antimicrobial intervention may take more time to resolve, there is a chance the issue with the health mark labeling could be settled before September 21.
He added that the Canadian meat industry could see a billion dollars market in the EU if quotas are filled with high value cuts, coupled with favourable market conditions and currency exchange rates.
CETA vs. NAFTA
CETA affords the Canadian beef industry some relief as the renegotiations of the North American Free Trade Agreement (NAFTA) began on a contentious note in August.
US President Donald Trump had demanded for a fairer deal catering to his "America First" agenda and recently repeated his threat to withdraw from NAFTA. In response to US Trade Representative Robert Lighthizer's remark about Trump's push for drastic changes within the FTA, Canadian and Mexican officials fiercely maintained their countries' original positions on the agreement.
Given the unpredictability of the current US administration, it is not hard to see why CETA would be a welcome for the Canadian beef industry.
Rejecting US protectionism would be a benefit for North American beef producers, Masswhol told Calgary Eyeopener at the second annual Canadian Beef Industry Conference in Calgary.
The US is still a major market for Canadian producers as "a large amount" of beef and live cattle goes to the country and Mexico, he pointed out.
"So for the US, it's nearly $3 billion. It's almost evenly split between beef in a box and live cattle. Mexico, we did a little over $100 million last year," Masswhol added. "The Americans ship nearly $1 billion of beef into Canada, so it's beneficial for all of us."
The director also highlighted the Trans-Pacific Partnership (TPP), which the US had pulled out in the first week of the Trump presidency. Masswhol mentioned Japan - one of the many remaining TPP members - for its $100 million-a-year market. However, he lamented that Canadian beef producers' access is somewhat affected by another FTA between Japan and Australia.
"We are very supportive of efforts to either do a Canada-Japan bilateral agreement or see if we can salvage the TPP in some way with the remaining 11 countries and maybe even bring in some others," Masswhol said.
China is yet another key market, which - even without full access - Canada was able to ship $255 million worth of beef to two years ago. Today, the value eases to around a $60 million range, according to Masswhol.
"China can take more beef than all of Canada and the US produce combined, so we're just looking to make sure that we have predictable access to that market," he said.
