The Canada-EU Comprehensive Economic and Trade Agreement (CETA) entered into force on September 21, 2017. As part of this agreement, Canada allowed for 17.7 million kilograms of cheese to enter the domestic dairy market, duty-free, through the allocation of Tariff Rate Quota (TRQ).
At the time, DPAC argued that CETA cheese TRQ should be allocated to dairy processors who thoroughly understand the Canadian dairy market and have the experience and know-how to import a wide-variety of dairy products that best respond to consumers’ needs. DPAC also argued that allocating these TRQ to dairy processors was an essential tool to help mitigate losses from the trade deal and recoup some of the $7.5 billion in investments they had made since 2008.
In the end, the federal government allocated less than half of the available cheese TRQ to dairy processors, with more than 50% allocated to non-dairy stakeholders. This decision was a deep disappointment for Canadian dairy processors, and had serious impacts on the dairy processing facilities. It effectively took return on investments from dairy processors and handed those returns to others – despite those other sectors not being negatively affected by CETA in the first place, and having no vested interest in developing Canadian dairy markets.
What has happened since?
On occasions, like with CETA, when market access has been granted to trading partners, Canada’s dairy processors have proven themselves capable and dependable importers of foreign products. By investing in the import market, dairy processors can partially offset the economic harm caused by trade agreements.
Indeed, dairy import licenses (TRQ) under WTO have been filled by Canadian dairy processors at rates above 98% for two decades. Last year, dairy processors contributed significantly to filling CETA quota despite holding less than 50% of the TRQ. Imports level under CETA this year are ahead of this time last year.
Despite this positive record, dairy processors’ commitment to fulfilling Canada’s trade obligations under CETA has come into question, both from the EU and other stakeholders. Our industry has been accused of “playing games,” and it has been alleged that the EU is “not getting what they bargained for.” This is patently false.
Dairy processors are growing their current import levels. They are actively consulting with Global Affairs Canada to find ways for the industry to continue to meet Canada’s trade obligations. Their aforementioned performance under WTO speaks for itself.
Meanwhile, European reciprocation has been slow to materialize. A key provision of CETA is the access granted to the European market for Canadian beef and pork producers; CETA is often touted as a “cheese for meat” deal. However, annual exports of Canadian beef and pork have yet to surpass 2% of their respective quota levels – and not for a lack of effort on the part of Canadian producers.
It is tempting to accept the argument that allocating TRQ to dairy processors is to provide those processors with a tool to block foreign imports. However, it is clearly not borne out by the facts. Canadian dairy processors have proven themselves ready and able to partake in international trade in good faith. Moreover, TRQ are an effective tool to mitigate economic harm to Canadian dairy processors at no cost to the taxpayer.
What is DPAC’s position going forward?
GAC is currently reviewing its TRQ allocation policy for all trade deals, including CETA. DPAC urgently requests that the vast majority of TRQ be allocated to dairy processors. This would best serve Canadian consumers and allow processors to invest in this import market, thus blunting the negative effects of CETA.
Want to know more about CETA and its impact on dairy?
As the government makes a decision on CETA compensation, it needs to remember that Canadian dairy families are worth fighting for.