Foreign Trade Committee
The Foreign Trade Committee works to ensure favourable access to international markets for the Canadian beef industry and prevent exposure to unfair competition or dumping into the Canadian market, with a top priority focus on eliminating programs, measures and subsidies that distort world trade.
The final months of 2018 proved very positive on the foreign trade front with many of the CCA’s top priorities crossing the finish line. The North American Free Trade Agreement (NAFTA) negotiations concluded with a new Canada-United States-Mexico-Agreement (CUSMA), preferential access to Japan through the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) has been achieved and we are seeing encouraging growth in Canadian beef exports to Europe under the Canada-EU Comprehensive and Economic Trade Agreement (CETA) Of course, much follow-up work remains as well as continuing to address a number of significant market access barriers
The NAFTA modernization negotiations reached a successful conclusion and new CUSMA was announced on October 1 following a final stretch of intensive negotiations. CCA’s Dennis Laycraft and John Masswohl met the Prime Minister’s trade advisors on the Friday September 28, in the midst of much public rhetoric suggesting that “no deal is better than a bad deal,” to explain that for Canadian beef producers, no deal would be the worst possible outcome. The CCA also explained the seasonality of the cattle business and the importance of having secure and predictable U.S. access during the fall calf market.
The final deal meets CCA’s objectives in retaining unlimited duty-free trade in cattle and beef between Canada and the U.S. with unchanged rules of origin and no new origin labeling requirements. We were also pleased that the dispute settlement mechanisms were retained. The CCA had sought improvements on some regulatory measures affecting border requirements for cattle and beef trade and although these were not part of the final agreement, there is an institutional commitment to continue work to reduce regulatory burden which we will utilize going forward.
The next step is for the three national legislatures to ratify and implement the new agreement. In the U.S., the matter of when or if the U.S. Congress will do so has become uncertain as the Democrats have won control over the House of Representatives. It is expected that the Democrats may seek further labour provisions in the agreement and also that Speaker Nancy Pelosi will not want to give the President a victory by passing an USMCA bill. The relationship between the Speaker and the President has not improved in the midst of the acrimony over the recent partial U.S. government shutdown.
A delay in implementing the new agreement is not a significant concern for the beef sector as long as the existing NAFTA remains in effect. However, President Trump has signaled that he will withdraw the U.S. from the existing agreement. This would be a tactic to put pressure on Congress to act more quickly on the new agreement. The President has already shown many times that he does not bluff even when his threats are reckless and endanger U.S. jobs. Speaker Pelosi however has already demonstrated during the shutdown that she will not bend to pressure from the White House and will make the President wear any pain inflicted on the U.S. economy.
An additional ongoing concern is that following the conclusion of negotiations, the U.S. did not remove their tariffs imposed on Canadian steel and aluminum, which means that Canada will not remove its retaliatory tariffs on several products including some processed U.S. beef items such as jerky. Efforts are commencing by Senate Republicans to address the tariffs, but the extent of overriding the President’s tactics remains uncertain.
As the new Democrat controlled House organizes and Colin Peterson regains the chairmanship of the Agriculture Committee, CCA will remain mindful that Rep. Peterson was one of the main proponents of U.S. Country of Origin Labeling (COOL) the previous time he chaired that Committee.
In summary, things are mostly in a positive state with the U.S. at the moment, but there are many uncertainties about which we must remain vigilant. CCA’s approach has been to maintain close contact with the National Cattlemen’s Beef Association as they explain to the U.S. Administration that the Canada-U.S. beef trading relationship works well and everything possible should be done to ensure it is maintained.
Access to Japan/CPTPP
It was a top priority for the CCA to achieve the implementation of the CPTPP prior to the end of 2018 with Canada as one of the first six signatories to ratify. The CCA worked intensely with the government and official opposition Members and Senators and our Canadian Agri-Food Trade Alliance (CAFTA) partners. The CPTPP came into effect amongst Canada, Japan, Australia, New Zealand, Singapore and Mexico on December 30, 2018. Vietnam became the seventh to implement on January 14, 2019.
On January 19, 2019, International Trade Diversification Minister Jim Carr attended a meeting of the CPTPP ministers in Tokyo, Japan, to discuss next steps for the agreement, including the accession of additional countries. The ministers agreed that additional countries that intend to accept the terms of the CPTPP are encouraged to express their interest in joining.
As of January 2019, Japanese officials were in the advanced steps of recommending eliminating the requirement that imported beef be from cattle under 30 months of age. The CCA anticipates that this development could be approved by mid-2019 thus significantly expanding the ability to export beef to Japan.
The CETA has been in provisional effect for just over a year and Canadian beef exports are showing increasing promise and performance in the EU market. Trade data available through November 2018 shows year-to-date (YTD) volume of exports up 83 per cent (890 tonnes in 2018 compared to 486 tonnes a year earlier). YTD export value is up 73 per cent ($13.3 million in 2018 compared with $7.7 million the previous year). The value per kg is an impressive $14.93 so far this year.
European beef and veal are also doing well in Canada. Through November 2018 YTD volume of imports up is 16 per cent (3,168 tonnes in 2018 compared with 2,729 tonnes a year earlier). YTD import value is up 36 per cent ($19.7 million in 2018 compared with $14.5 million a year earlier). EU beef and veal has been averaging $6.23 per kg in Canada in 2018.
The CCA and the Canadian Pork Council undertook a mission to Germany, Poland and Spain in November. In all the markets we delivered the message to livestock producers, meat exporters and government officials that we are tracking the success of their meat in Canada and we welcome unrestricted two-way trade. We expressed our expectation that they will be supportive of the resolution of the EU’s remaining restrictions on Canadian meat exports.
However, from what we continue to see, even with the remaining unresolved issues, the most significant constraint on increasing Canadian beef in the EU right now is the limited supply of Canadian cattle produced to EU requirements. At least one of the major Canadian packers is shipping regularly to the EU. We understand that packer is buying all the EU-eligible cattle they can get at good returns for producers and they are selling all the beef they can at a good profit. Certainly, we would expect the returns to improve further once the technical issues are resolved, but there is good profit to be made regardless in the meantime.
The CCA is working on a number of proposals with the Canadian Food Inspection Agency (CFIA) aimed at facilitating the eligibility of Canadian cattle for export to the EU. Firstly, as mature cattle culled out of producers’ breeding herds will not have been exposed to hormone or beta agonist growth promotants, we are seeking a simplified certification option for these cattle. Secondly, with the advancement of the Verified Beef Production Plus (VBP+) program, we are seeking to develop an option whereby VBP+ auditors could certify the eligibility of cattle for the EU in lieu of a producer utilizing a veterinarian authorized by the CFIA. In the meantime, the CFIA has increased the number of authorized veterinarians to nearly 50 from less than 30. This is welcome, but the authorized veterinarians remain largely concentrated in Alberta and are about one-tenth of the number of veterinarians the CCA estimates are required.
With respect to our ongoing trade relationship with an independent United Kingdom (UK), it is probable that Canada and the UK will agree to replicate as much as possible the CETA in a new temporary agreement that would come into effect as soon as the UK leaves the EU. Once the UK is independent, Canada and the UK are expected to commence a negotiation to establish a replacement agreement that makes sense in a bilateral context. The CCA is consulting with the Government of Canada with an initial focus on tariff rate quota issues (quantity and administration) for the initial temporary agreement as well as laying markers on other technical issues for the longer term agreement.
China is and will continue to be a very complicated, very promising and very volatile market.
Following the approval in April 2018 of some Canadian facilities to ship fresh-chilled boneless beef to China, monthly exports grew steadily for the remainder of the year (data only available to November at writing). The next step in expansion will be approval of the remainder of the Canadian facilities audited by China in 2017 and then we hope to work on full recognition of the Canadian federal meat inspection system.
In November, CCA President David Haywood-Farmer and Executive Vice President Dennis Laycraft travelled with Agriculture and Agri-Food Minister Lawrence MacAulay to China to promote Canadian beef.
Following the announcement of the CUSMA, China began to make some public commentary that they too would like to negotiate a free trade agreement with Canada, giving new hope to the initiative that failed to launch during Prime Minister Justin Trudeau’s mission to Beijing in 2017. Unfortunately, Canada’s relationship with China took a sharp turn off course in early December with the arrest of a Huawei executive in Vancouver. Although we have not heard of any issues with Canadian beef access since that incident, we are very aware of the potential of such an incident to put access to the Chinese market at risk.
Another complicating factor is the continued uncertainty over the China-U.S. trade relationship. Both countries have implemented tariffs on the other, including on U.S. beef, pork and other agricultural exports to China. We are hopeful that this episode will be concluded shortly and that markets can have an opportunity to stabilize.
Committee members: Bob Lowe, Chair; Doug Sawyer, Vice Chair; Cathy Sharp, Colin Campbell, Brian McKersie, Duane Thompson, Charlie Christie, Rob Lipsett,
Gord Adams, Philippe Alain, Andrea Haywood-Farmer, YCC ex-officio; Canada Beef, Michael Latimer (Canadian Beef Breeds Council). CCA staff: John Masswohl,
Mark Klassen, Dennis Laycraft.
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