Finance Post | 23 May 2019
’Beef and pork for cheese deal’ sours as strict EU health rules hinder Canadian exports under CETA
by Naomi Powell
Canadian beef and pork producers are struggling to take advantage of a newly minted trade deal with Europe, as steep regulatory barriers and technical irritants frustrate efforts to open new routes into one of the richest markets in the world.
Though a boost in the amount of tariff-free Canadian beef and pork allowed to enter the European Union was a highlight of the Comprehensive Economic and Trade Agreement (CETA), domestic producers have yet to capitalize on almost any of that new access in 2018, according to data from Global Affairs Canada.
Meantime, European cheese producers filled almost all of the expanded quota granted to them under the pact.
“When it comes to agriculture and food, CETA was supposed to be a beef and pork for cheese deal,” said Al Mussell, lead researcher at Agri-Food Economic Systems. “We wanted to expand access so that our meat producers here would invest more in their operations, but that hasn’t happened. The amounts we’ve sent over there are really, really small.”
CETA, which provisionally came into effect in September 2017, expanded the amount or “quota” of tariff-free Canadian pork allowed into the EU from 30,549 tonnes in 2018 to nearly 80,000 tonnes over six years. Tariff-free access for fresh and frozen beef will grow from 20,000 tonnes to 50,000 tonnes over the period.
In return, Canada has agreed to double its quota for tariff-free European cheese to 18,500 tonnes, opening four per cent of this country’s highly protected domestic market.
Despite the new opportunities afforded by the deal, pork and beef exports to Europe have hardly budged, despite being “one of the most important elements for Canada in this negotiation” according to a summary of the CETA talks from the European Commission.
Canadian exporters filled none of their frozen beef quota in 2018, and just 3.1 per cent of the chilled beef allowance. Pork producers used just 1.5 per cent of the access allowed to them under the deal.
By contrast, European cheese exporters have taken almost full advantage of their growing market access here, filling 99.2 per cent of Canada’s quota for fine quality cheese in 2018 and 71.1 per cent of the quota for industrial cheese.
“We’re not doing very well, especially on the pork side,” said Jorge Correa, vice-president of market access and technical affairs with the Canadian Meat Council. “There is a real imbalance of trade between Canada and Europe.”
The problem is largely rooted in European health and quality standards, which still apply to Canadian products under CETA even as 93 per cent of agricultural tariffs disappeared. For instance, hormones used in Canadian beef are not allowed in the EU, and Canadian cattle must be certified as “EU-compliant” adding a testing requirement that is absent in other markets. What’s more, Canadian “carcass washes” or products used to remove bacteria from meat are also incompatible with EU law.
“For us it’s very difficult,” said Correa. “Everything has to be done exactly by regulation and there’s testing required in between. Some of our plants are doing it but others are saying ‘no way, I can’t afford it.’”
As exports to the EU lag, shipments of pork and beef to Japan have spiked under the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) — an 11-nation trade deal abandoned by U.S. President Donald Trump that came into effect in January. Shipments of pork rose 122 per cent in February compared to the same month a year ago as producers rushed to capitalize on the preferential tariff treatment in the lucrative market. Beef shipments tripled in the first month the deal was in effect.
For pork producers, the draw of the wealthy Japanese market is as responsible for lacklustre exports to Europe as regulatory standards, said Gary Stordy, director of government and corporate affairs at the Canadian Pork Council.
“There is disappointment that some of the treatments we use aren’t approved in Europe but it hasn’t totally dislodged our interest in the market,” he said. “It’s just that our interest has very much shifted to Asian markets.”
In all, European exports to Canada rose 14.5 per cent in 2018 compared to a year earlier. Canadian exports to the European union rose at half that rate — though agricultural exports declined by three per cent according to data from Global Affairs Canada and the European Commission.