Via Financial Times

For evidence that a landmark trade deal with the EU has not so far lived up to the hopes of Canada’s farmers, just ask True North Foods.

The beef processing plant in the Canadian prairies spent a year and C$100,000 to gain certification to export to Europe, lured by the prospect of a lucrative market.

But since then True North has sent just one beef shipment to the EU, which it completed in a single day in July.

“We’re not all that motivated to send anything to Europe at the moment,” said Calvin Vaags, the plant’s owner, who is overburdened by demand from North America. “It’s a new market and it takes a lot of work.”

Implemented in 2017, the EU’s trade agreement with Canada — Comprehensive Economic and Trade Agreement, or Ceta — was the biggest in the bloc’s history and eliminated 98 per cent of bilateral tariffs. But two years on the deal has been less fruitful than many Canadians expected.

Overall EU exports to Canada rose 11 per cent in 2018 from a year earlier, while imports from Canada rose 7 per cent. Canadian agricultural exports to the EU, however, fell 15 per cent.

The imbalance stems partly from stringent European standards banning antibiotics and growth enhancement technology, Canadian meat industry bodies and farmers told the Financial Times. Farmers must have their methods endorsed by EU-certified veterinarians, who are in short supply in the Canadian west.

Bob Lowe, an Alberta cattleman who uses growth enhancement, said that despite the initial excitement, he had not yet seriously considered ditching the money-saving technology to sell EU-certified beef. “If it doesn’t work in our scenario, then we won’t change,” he said.

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Canada’s mixed experience could prove instructive for the UK, whose prime minister, Boris Johnson, has touted a “Canada-plus” arrangement for Britain’s trade relationship with the EU, based on Ceta.

While the Canada deal has been held up as an example of how a single country can negotiate trade terms with the EU, the reality has been more complex.

A vast new market was a selling point of the deal, but export quotas — the caps placed on the amount of different goods that can be shipped within a given period — tell a different story. Canadian pork farmers filled just 1.5 per cent of their export quota in 2018. Cattlemen filled 3.1 per cent of theirs in 2018 and have netted just C$16m ($12.2m) from Ceta in the first nine months of 2019, far below initial expectations of $600m annually. By contrast, European fine cheese exporters have filled their export quota to Canada. 

“This negotiation took many years, and it was actually the last Conservative government that negotiated those market access elements,” a senior Canadian trade official said. “And yes, we don’t like exactly where we are at.”

The US is the primary destination for Canadian meat. Canada’s farmers find that the disparity between American and European standards makes it hard to sell meat profitably to both.

Unable to ignore the market on their doorstep, British farmers too might struggle to fill shelves both in Europe and further afield after Brexit under a Ceta-style agreement.

“If [EU] standards are significantly different [from those in] your largest market, the US”, that is a major drawback, said Carlo Dade, director of the Trade & Investment Centre at the Canada West Foundation. “You can understand why a farmer making a rational decision might look elsewhere.”

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While Canadian farmers have struggled to reap the benefits of Ceta, other industries, from pharmaceuticals to vehicles, have prospered. In the year to date, Canada has sent 368 per cent more aluminium to the EU than in the 12 months before Ceta.

Canadian consumers are also benefiting after double-digit duties disappeared on European food and clothing.

“I believe European businesses have benefited more from Ceta than Canadian businesses,” said Christian Sivière, a Canadian trade expert and consultant.

Trade in services between Canada and the EU is up 11.7 per cent compared with two years ago. But without single-market building blocks, from free movement to an integrated court system, there are still restrictions. A local licence is still required for the provision of services under Ceta, hindering seamless cross-border business.

However, that may not remain the case. The agreement’s most-favoured nation clause means that if Europe offers another partner, such as the UK, greater financial services access, then it must offer the same to Canada. That could prolong EU-UK negotiations, which will focus on services, as member states balk at unintended concessions to Ottawa.

Ratification is another issue. Ceta has been ratified by only 14 European countries and will only take full effect when all EU member states ratify it. That has not always come easily. In 2016, the Belgian region of Wallonia almost nixed the entire deal. Last year, the Italians threatened not to ratify.

“These things will not torpedo the whole deal,” said the Canadian official. “But they will delay it because you need to wait for the right timing and supportive governments.” 

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That throws doubt on Mr Johnson’s pledge to negotiate a deal by December 2020, despite his recent resounding electoral victory.

The sense among many in Canada is that the EU, with millions more consumers, is able to call the shots. For Britain, which is short of trade negotiators and hoping to cut numerous deals simultaneously, that may be a warning sign. 

“The European Commission is bureaucratic and frustratingly unique that way, but they are sharp and they will not be in a rush,” the Canadian official warned.