Ontario praises trade deal but wants compensation for cheese makers

Thursday, October 17, 2013

by SUSAN MANN

The federal government needs to compensate Ontario cheese producers and processors for economic losses from the increased specialty cheese access granted to the European Union as part of the Canada-EU trade deal reached today.

Gabe De Roche, spokesman for Ontario Economic Development, Trade and Employment Minister Eric Hoskins, says, “we’re concerned about the impact this will have, especially on the specialty cheese sector.”

The province has also requested the longest possible phase-in for the implementation of cheese imports from the EU “to give our producers and processors more time to adjust,” he says. Another request is the federal government should provide funding for a marketing strategy for Ontario specialty cheeses, he says.

De Roche says Ontario hasn’t yet specified the amount of compensation that’s needed. “That’s a conversation that still needs to happen between us and the federal government.” The compensation should go to anyone, including farmers, who suffer losses as a result of the Comprehensive Economic and Trade Agreement.

While it has concerns for the Ontario specialty cheese and wine/spirits industries, the Ontario government is pleased with the agreement in principle. The deal is projected to create 30,000 jobs in the province.

Ron Versteeg, an Ontario dairy farmer and vice-president of Dairy Farmers of Canada, says during the negotiations the Europeans targeted the fine cheese market, which he described as the “jewel in the crown” of the total cheese market. “It’s higher value and more lucrative to them; more damaging to us.”

Dairy Farmers’ focus now is on assessing the potential damages from the trade deal and “ensuring that governments understand the true impacts,” he notes, adding they’ve been told this deal will take two years to finalize and there could potentially be a five-year phase-in period.

The agreement means EU cheese imports to Canada will increase to 30,000 tonnes from 13,000 tonnes.

Versteeg says he couldn’t comment on whether the federal government is considering compensating cheese producers and processors. As for Ontario’s request for compensation, he says “anything that can minimize the damage or soften the blow, that’s good.”

But the story this week, he says, is the trade deal will do some damage to the dairy industry.

In a press release, Prime Minister Stephen Harper called the deal between Canada and the European Union “the biggest, most ambitious trade agreement Canada has ever reached.” The deal provides Canada with preferential market access to the EU’s more than 50 million consumers.

The elimination of about 98 per cent of all EU tariff lines on the first day the agreement comes into force will translate into increased profits and market opportunities for Canadian businesses, Harper says.

The deal is a game changer for Canadian beef and pork producers. Grain farmers also stand to gain.

Gord Pugh, manager of federal government relations for Grain Farmers of Ontario, says tariffs on grains and oilseeds and the products made from them earmarked for the EU market will be eliminated. For example, the over-quota duty of 95 Euros a tonne on low protein wheat and the in-quota duty of 12 Euros a tonne will be removed by the end of the phase-in period.

“That’s very helpful for us,” he says, noting the tariff removal will result in more wheat being shipped to Europe from Canada.

Tariffs are also being removed on soybean oil and meal. Those tariff rates are four to five per cent of the value of the shipment. “That’s pretty significant when you’re talking a shipment of oil could be $3,000 a tonne,” he says.

There were substantive duties on flour, meal and baked goods that will also be axed. The result will be “more Ontario wheat and corn products would get sold to processors in Ontario and then shipped overseas,” says Pugh, who participated in a technical briefing today with Canadian trade negotiators.

Another positive development is a working group will be set up to look at biotechnology matters. “This is particularly important for soybeans,” he notes. “They’d look at things like expeditious approvals of GM (genetically modified) products that are commercialized in Canada.”

The grains and oilseeds industry was looking for two things from the trade deal. One was incremental market gains and the other was market maintenance. “The EU is, by far, the largest market for Ontario and Canadian soybeans,” Pugh says, noting one-quarter of the Canadian soybean crop heads to Europe. “This agreement should help in the maintenance of that market.”

Dave Solverson, vice-president of the Canadian Cattlemen’s Association, says they’re very pleased with the deal. “We’ve been working closely with the Government of Canada since 2009 to try to get a positive outcome.”

The agreement provides duty free access for 64,950 tonnes of Canadian beef valued at nearly $600 million.

In an Oct. 18 press release, the Canadian Pork Council notes the agreement provides tariff free access for processed pork products on the day the deal takes effect. For pork cuts, Canada will acquire a quota volume equivalent to more than 80,000 tonnes. The industry sees a market opportunity for shipping hams and other pork cuts to Europe.

Currently pork cut exports to the EU are virtually non-existent because of tariff and non-tariff barriers. But those will be addressed in the trade deal. The trade deal will give the Canadian pork sector meaningful access to the EU market and in a few years after it’s implemented the deal could lead to annual sales of $400 million.

The Ontario government has also requested compensation for wine and spirits producers for economic losses they incur, as they will be competing with a large number of similarly priced European products and their market share could potentially be cut.

De Roche says the deal calls for a change in how prices for wines and spirits are determined. “The result will be that expensive European spirits and wine will come down in price slightly and that will mean more competition for Ontario products that are at that same price point,” he says, noting they don’t know yet how much the losses will be.

The Wine Council of Ontario declined to comment.

Now that the Canadian and European Union governments have reached an agreement in principle on the trade deal both parties will conclude the formal agreement and do a legal review. Once the final agreement is signed, it needs to be ratified by the Canadian and European Union parliaments. BF