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CETA'S IMPORT QUOTAS WEIGH HEAVILY ON CANADIAN DAIRY SECTOR
By Gillian Ward
Two years into the Canada/European Union, Comprehensive Economic and Trade Agreement(CETA), have we created more Canadian jobs, or reduced red tape to get Canadian products into Europe as intended? While tariffs have largely been removed, increased import quotas for EU products are weighing heavily on Canada’s supply managed Agri-food sectors, particularly our domestic dairy sector. WaterToday heard from the President of the Dairy Processors Association of Canada (DPAC) about the state of Canadian cheese since CETA.
Mathieu Frigon spoke with WaterToday by phone from the DPAC office in Ottawa.
“We see the impact already of CETA, it's been huge.”
With the CETA import volume for EU cheese reaching apex at 16 million kilograms by 2024, and additional dairy products making their way to Canadian dairy aisles under Comprehensive and Progressive Transpacific Partnership (CPTPP), the members of DPAC have taken a direct hit with damages estimated at $250 million per year. With 24,000 highly skilled manufacturing jobs in the dairy processing sector, mitigation of losses due to these trade deals are critical to protect Canadian jobs.
In an emailed statement from Shana Allen, Communications Manager for the Canadian Dairy Commission,
“Cheese imports from the EU as a result of CETA will have a direct impact by reducing the national production quota. The CDC is closely monitoring imports of cheese and taking these into account when calculating national quota requirements.”
“What we’ve been advocating for at DPAC is two key tools to mitigate that impact”, said DPAC's Frigon.
“First is, that the majority of import licenses issued for the increased trade volume of cheese products be allocated to DPAC members, and second, that compensation by way of an investment program be established and funded for the processors.”
It seems neither of the loss mitigation tools is coming together for dairy processors. When compensation for dairy farmers was announced in August 2019, the processors were not included.
When import licenses for EU cheeses were handed out, DPAC came up short again.
Frigon says, “The Minister of Agriculture is responsible on the compensation package; however, the allocation of import license is under the purview of Global Affairs Canada, Jim Carr is responsible for it.”
Mr. Frigon disclosed that DPAC has been allocated less than half of the new import volume under CETA. “In the free trade with Europe, we were allocated only 45% of the import license, so that was a huge disappointment for us.”
Frigon reasoned, “It’s not only because (import license is) a mitigation tool, its also because we are dairy products experts. So, we are in the best position to serve consumers. We have a vested interest in the dairy aisle, we want to grow it and minimize the impact on the domestic production line and dairy processing facilities by importing product that will complement the domestic offering as opposed to replacing it.”
WaterToday checked in with Minister Carr’s office for the rationale on allocation of the new import licenses.
From an emailed statement, “The allocation policies for the CETA cheese tariff rate quotas (TRQs) seek to achieve a variety of objectives, including spreading access to quota across the Canadian cheese value chain to accommodate a broad range of interests. The Minister’s decision was guided by Canada’s domestic obligations under the Export and Import Permit Act, our commitments under CETA, and feedback from a broad range of domestic and international stakeholders in public consultations held in June and July 2016.
DPAC points out that while its members are adjusting to the loss of market, new players in the cheese trade only see upside potential. “One thing to know is that further processors and retailers don’t have any impact on trade agreements. So, they cannot argue that new import license quota mitigates losses for them. Actually, for retailers, distributors, and further processors, trade agreements represent an opportunity. They are on record saying those trade agreements represent an opportunity,” Frigon points out.
For the 30% of EU cheese imports allocated to new licensees, the impact is, according to Frigon, “obviously, extremely different than for us, those are tangible losses that our members will sustain because of the volume loss, so it’s a very different reality.”
As for compensation, the Minister of Agriculture and Agri-food initiated a working group with dairy producers and processors, to calculate the financial impact of market losses in the dairy sector as a result of CETA and CPTPP. Dairy Farmers received a compensation package worth over $3 billion in August 2019.
Bobby Matheson of DFC says that while farmers would have preferred to keep milking their cows rather than take a pay out to sit on the sidelines, they did accept the compensation, with no reduction of quota.
Canada is spending $1.5 billion to insure milk production quota, preserving the value farmers have invested in their business.
DPAC President Frigon says Agriculture Minister Bibeau assured processors compensation as well, but with no announcement before the writ was dropped, processors are feeling left out in the cold.
“Very strong commitments were made by the Minister. We were very confident that announcement would be made both for dairy farmers and dairy processors but that was not the case. We were an integral part of that working group along with Dairy farmers. It doesn’t look like we will get anything for dairy processors before the election, very unfortunately, so we were extremely disappointed about this” says Frigon, on behalf of DPAC members.
Honourable Marie-Claude Bibeau, Minister of Agriculture and Liberal Member of Parliament for Compton-Stanstead spoke with WaterToday as she traveled to Ottawa on the campaign trail for re-election.
Minister Bibeau explained, “in the budget 2019 we committed to all the supply managed industries— producers and processors — that we would, and that we will, fully and fairly compensate all of them.
We formed a working group to evaluate with them what would be, actually the working group were established before the budget so the idea was to work with them to really, you know, calculate what impact the free trade agreements would have. Then we had the budget and the discussions were not over yet, and we continue the conversation. In August, we arrived at a sort of a set agreement with the dairy producers, we agreed on the level they would be impacted, and this is when I made this commitment, this announcement…for dairy producers only.”
Minister Bibeau went on to say, “The processors were not included in the budget in 2019 except that we mentioned that our commitment is just as strong with them, but once again we didn’t have time to come to a conclusion with the working group before the election.”
When WaterToday sought to confirm that compensation for dairy processors is coming, Minister Bibeau emphatically responded, “Absolutely!”
As for the potential for Canadian dairy to increased exports to the EU and other markets, DPAC President Frigon makes it clear, “Canadian dairy system is extremely different than the US and Europe. No direct subsidy. Only through the price of milk that dairy farmers get their return. Makes Canadian product uncompetitive on the world stage.”
Even more challenging than the high cost of our dairy products, we must meet strict parameters set by the European nations.
According to Natasha Nystrom, spokesperson for the Ministry of International Trade, “The Canadian Food Inspection Agency (CFIA) regularly issues health certificates for exports of dairy products to the European Union.
CFIA and the European Commission’s Directorate General for Health and Food Safety (DG SANTE) have been working through the Canada-European Union Comprehensive Economic and Trade Agreement Sanitary and Phytosanitary Measures Joint Management Committee (CETA SPS JMC) work program to simplify export requirements.”
Nystrom says that dairy sector associations are encouraged to raise any specific request for new market access for their products or raise issues related to trade barriers via email at: email@example.com.”
In the meantime, we hope to see continued brisk sales for Canadian cheese products at home. It might be true that the kids won’t move out on their own if we keep buying cheese, but your local dairy processors might just keep their people working while we figure out how to reinvent Canadian dairy.
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