CANADA and the European Union have reached an agreement in principle on a comprehensive free trade agreement (FTA) that will significantly boost trade and investment ties between the two partners.
It also provides a first look at how a potential final agreement between the U.S. and EU could pan out if ever completed.
Canada said this is the "biggest, most ambitious trade agreement that Canada has ever reached." It covers most aspects of the Canada-EU bilateral economic relationship, including trade in goods and services, investment and government procurement.
Now that an agreement in principle has been reached, both parties will seek to conclude the formal Comprehensive Economic & Trade Agreement (CETA) and undertake a legal review of the document. Once the final agreement is signed, it will then need to be ratified by each country's respective parliament.
Shawna Morris, National Milk Producers Federation (NMPF) vice president of trade policy, told Feedstuffs that details of the agreement are still relatively limited since only higher-level information has been released by the EU and Canada and the text won't be available for quite some time.
However, Morris said it is NMPF's understanding that Canada granted the EU a relatively limited new tariff rate quota for cheese and did not commit to eliminating most dairy tariffs or providing much other access in other areas.
"This type of outcome with Canada would not be an acceptable one to NMPF and the U.S. Dairy Export Council in the Trans-Pacific Partnership talks," she said.
The U.S. also is closely watching how the EU plans to handle geographical indications (GIs), which are of major importance to the EU, but many believe that GIs, if used inappropriately, cause trade disruptions for common food products that could be classified as GIs.
For instance, under an FTA with Korea, non-European cheese producers can no longer sell asiago, feta, fontina or gorgonzola under those names. Reports indicate that the EU may have been able to accomplish the same in CETA.
"These names have long been generic in Canada and many other trading partners of Canada, including the United States," Morris said. "FTAs are supposed to focus on removing barriers to trade and competition. Imposing new burdens on those wishing to use generic terms would stand that concept on its head by building up new trade restrictions rather than tearing them down."
The Dairy Farmers of Canada opposed CETA, saying it will put small, local Canadian cheese-makers out of business. If this deal proceeds, the Canadian government will have given the EU an additional exclusive access of 32% of the current fine cheese market in Canada over and above the existing generous access, the dairy group said.
Canada's livestock producers voiced support for the agreement because of the potential boost to their export-driven sectors.
The European market holds great opportunity for Canadian beef and veal, with the potential for 64,950 metric tons of duty-free market access for Canadian beef and veal worth more than $600 million, Canada Beef reported. Discussions around CETA have been ongoing since 2009, and reported breakthroughs on meat and dairy issues in September have allowed Canada and the EU to move forward and finalize the agreement.
Effective immediately, Canada will gain unlimited duty-free access to the EU for live cattle, genetics, most offals, tallow and rendered products, processed beef products, hides and skins.
In addition to securing free access for processed pork products on the day CETA takes effect, Canada will acquire a quota volume equivalent to more than 80,000 mt of pork cuts. Canada currently imports a significant volume of high-value pork ribs from the EU, and the Canadian Pork Council sees the market opportunity for shipping hams and other pork cuts to the EU.
Barley Council of Canada chair Brian Otto also noted, "CETA is the good opportunity that the Canadian barley value chain has been waiting for. There is more work to be done, but we are confident that if our federal and provincial governments finalize this agreement, sustainable growth and profitability will be achieved."
A joint study by the Canadian government and the EU estimated that Canada's processed food exports could grow by as much as $2 billion annually if Canada integrates into the European market.
Canada's agricultural exports to the EU averaged $2.5 billion annually between 2010 and 2012, led by wheat (durum and common), soybeans and other oilseeds and canola oil. Canada is interested in expanding exports of these and a wide variety of products, including meats, grains, oilseeds, fruits, vegetables and processed foods.
Canadian agricultural exports to the EU face high tariff rates — an average of 13.9%.
Upon entry into force of CETA, almost 94% of EU agricultural tariff lines will be duty free, including durum wheat (up to $190 per ton), other wheat (up to $122 per ton) and oils, including canola oil (3.2-9.6%).
Currently, Canada is the world's fifth-largest agri-food exporter in the world, generating more than $40 billion each year through its beef, malting barley, pork, wheat and canola supply.