Canada’s total agricultural, fish and forestry imports were valued at $34 billion in 2016. Imports from the U.S. totaled $22.8 billion (62 percent of total Canadian imports), while imports from the EU totaled $4 billion (10 percent of total Canadian imports). Approximately $16 billion, or 80 percent, of the value of Canada’s agricultural imports from the United States are comprised of consumer high-value products, including processed foods, fresh/frozen fruits and vegetables, and meats. As a result, Canada imports over 25 percent of the U.S. agricultural global trade in the consumer-oriented category
Upon CETA implementation, the vast majority of EU agricultural, fish, and forestry products will enter Canada duty free, a very limited portion receiving phase-in treatments to duty-free status, and a portion being exempt from tariff reduction (100 tariff lines)
U.S. agricultural exports to Canada may encounter increased competition from products of EU origin. The level and timing U.S. trade impact is predicated on many comparative factors, including, but not limited to transportation costs and duration, currency exchange rates, price competitiveness, and regulatory differences. Canada’s leading agricultural imports from the EU in 2016, by value, that will receive immediate duty-free access include: wine ($770M), cocoa preparations ($135M), fruit juice concentrates/powders ($80M), cookies ($70M), sugar confection ($65), alcoholic cider, perry, mead, sake ($43M), some bread, pastry, cakes ($40M), waters (mineral/flavored) ($39M), etc. This immediate duty-free access may create increased competition for exports of these U.S. products in particular. For reference, Canada’s top agricultural imports from the EU in 2016, by tariff line, with trade valued at over $20 million are made available in Appendix I.
Post analysis indicates a broad scope of U.S. agricultural product exports to Canada that may face more competition from the EU, with general categories including: proteins (specific beef, pork, lamb and poultry products), seafood, fruits and vegetables (incl. processed), grains, oilseeds, alcoholic beverages, and processed food products. U.S. exporters are encouraged to review the truncated Canadian tariff schedule for competing EU products whose current duty into Canada exceeds 5 percent and that will be receiving immediate duty-free or phased in duty free access under CETA (Refer to Appendix II)
Timeline for implementation of CETA:
Under current procedural timelines required by both parties, the expected plausible CETA implementation date is spring 2017 – June 1st . The CETA Agreement provides for provisional implementation “from the first day of the month following the date on which the Parties have notified each other that their respective internal requirements and procedures….have been completed or on such other date as the Parties may agree.” Approvals to allow for provisional implementation of CETA by the European Union are expected to be completed by April 1, 2017. Bill C-30, the implementing legislation for the CETA agreement in Canada, is still under review. Following Royal Assent of Bill C- 30, implementing regulations must be reviewed, consulted, and published in the Canada Gazette II.
February 14, 2017: Canada’s House of Commons passed Bill C-30, the implementing legislation for the EU-Canada Comprehensive Economic & Trade Agreement (CETA).
February 15, 2017: The European Parliament approved CETA by 408 votes to 254, with 33 abstentions. As a result, the agreement is expected to become provisionally operational as of April 1, while EU member states and regions continue the ratification process.
March 1, 2017: The Canadian Senate returned to session having completed the second reading of Bill C- 30. There are plans to hold at least one Committee hearing in the Senate on the agreement. Since there is general approval of the CETA across multiple parties, with little opposition, Bill C-30 is expected to be passed quickly by the Canadian Senate.
March 2017: The CETA implementation legislation, Bill C-30, receives royal assent by the Governor General of Canada. A process that takes only days, once the Canadian Senate passes Bill C-30.
March – May, 2017: Implementing regulations for CETA will be introduced, reviewed, consulted, and published in Gazette I (as needed) and Gazette II.
June 1, 2017: Anticipated implementation date of the Canada-European Union (EU) Comprehensive Economic and Trade Agreement.
Meat and Dairy TRQs and Reallocations:
Meat: The EU will receive unlimited duty-free access to the Canadian market for beef and pork. Canada is gaining duty-free access for beef to the European market through tariff rate quotas (TRQs) totaling close to 50,000 MT (carcass weight equivalent (CWE)). Part of this quota comes from shifting Canada’s existing 3,200 MT (product weight basis, or 4,160 MT in CWE) share in the EU’s MFN High Quality Beef quota stemming from the hormones case to a country-specific quota. In addition, Canadian beef will also receive duty-free, in-quota access under the existing 11,500 MT (product weight basis, or 14,950 MT in CWE) Hilton quota that Canada shares with the United States. U.S. exporters will continue to be charged the current 20 percent tariff on this quota. Canada further receives duty-free access for 3,000 MT of bison and 75,000 MT of pork, both volumes in carcass weight equivalent. All TRQs are gradually implemented over a six-year time period.
Dairy: Canada was granted unlimited access for dairy exports to the EU. The EU was granted additional quota access over a 6 year period for 16,000 tons of cheese plus and additional allocation of 1,700 tons for industrial cheese. In addition Canada will assign 800 tons of its existing 20,000 ton WTO cheese TRQ to the EU. Canada also agreed to recognize a list of 143 EU geographical indications (GIs).
Though Canada’s trademark registration and implementation process is aligned with that of the United States, concerns exist as to how CETA implementation will impact this regime, specific to geographic indication (GI) protections of certain EU goods. Under the agreement, Canadian GI coverage expands beyond existing protections for wine and spirits to a broad range of agricultural products including cheeses, meats, and olives. Such provisions can limit U.S. market access in Canada for a number of these products.
As an example, the inclusion of a grandfathering clause in CETA is of particular concern as it appears to allow only companies with registered trademarks prior to October 18, 2013 to continue to use certain cheese names. No other non-European producers will be allowed to use these names. The cheese types affected are “Asiago”, “Feta”, “Muenster”, “Fontina” and “Gorgonzola”. However, future users will be allowed to use these names when accompanied by expressions such as “kind,” “type,” “style,” “imitation,” or the like. Some U.S. exporters to Canada will be impacted by this. Beyond what is published in the Canadian implementing legislation, Post has not yet seen additional GIspecific implementing regulations that would address how the grandfathering provisions will be implemented. Additional details on the agreement’s implementation are still needed to determine the impact on U.S. exporters and overall U.S. market share in Canada. U.S. agricultural industry groups, including dairy, have great concerns over the GI provisions in CETA.