WASHINGTON, Nov. 2, 2016 - Canadian and the EU leaders are counting on the freshly signed Comprehensive Economic and Trade Agreement (CETA) to create billions of dollars in new trade revenue, but the pact, which has yet to be ratified, could also put a dent in U.S. dairy exports at a time when the industry is fighting to improve income.

CETA would extend Europe’s efforts to restrict the use of food names like Muenster cheese as well as open up Canada to thousands of tons of European dairy products, taking away business from the U.S., USDA Chief Economist Robert Johansson told Agri-Pulse.

European countries now ship about 14,000 metric tons of cheese to Canada, but CETA includes provisions that would guarantee the EU an additional 18,500 tons of exports, Johansson said. That would be about a 130 percent increase and give 4 percent of Canada’s cheese market to European cheese makers in Italy, France, the Netherlands, Denmark and the UK, said Johansson, who stressed that much of this trade would come at the expense of U.S. exports.

“The fact is we don’t have similar access (to Canada’s market) because we haven’t gotten (the Trans-Pacific Partnership) done yet,” Johansson said. “The EU is going to send more cheese and dairy to Canada, which could cut into our exports to Canada.”

If approved, the Trans-Pacific Partnership (TPP) would eventually increase U.S. dairy exports by about $1.8 billion per year, officials say. Most of that increase – about $1.2 billion – would come from new sales to Canada, according to an assessment by the U.S. International Trade Commission.

President Barack Obama has signed the TPP, but Congress has yet to ratify it. The 12-nation pact includes the U.S., Japan, Mexico, Canada, Australia, Vietnam, Brunei, Chile, New Zealand, Peru, Singapore and Malaysia. Because the U.S. and Japan are the two largest economies in the deal, TPP cannot go into effect without ratification by both of the countries.

But there is also no guarantee of ratification for CETA and the process could take a long time, said David Salmonsen, a senior director for the American Farm Bureau Federation.

“We’ll see what they do with it,” Salmonsen told Agri-Pulse, stressing that on the European side, 28 member countries and the EU parliament will all have to ratify the deal. “They have a lot of process over there.”

Salmonsen agreed that CETA removed a lot of tariffs between the EU and Canada, but he said it is the agreement on geographical indications (GIs) that has the U.S. farm groups most concerned.

“What we’re watching and have the most concern about … is the impact on geographical indicators,” he said.

The EU continues to push for protection of food names as it negotiates trade pacts across the globe, and the U.S. dairy industry is particularly worried. Every time a country agrees that it will agree to a protection of a name like Parmesan cheese, it makes it more difficult or impossible for U.S. producers to sell that product. In CETA, Canada agreed to restrictions on cheeses including Gorgonzola, Muenster, Feta and Fontina, Johansson said.

“That may cause difficulties for U.S. trade in those products to Canada,” the chief economist said.

The U.S. and the EU are negotiating their own trade pact – the Transatlantic Trade and Investment Partnership (T-TIP) – but so far U.S. negotiators have refused to agree to any GI demands from the Europeans. The U.S. exports about $70 million worth of cheese to Canada every year, according to data from USDA’s Foreign Agricultural Service.

“We remain deeply concerned by CETA in terms of its violation of Canada's existing international commitments and its limitations on market access,” said Jaime Castaneda, senior vice president for trade policy at the U.S. Dairy Export Council. “Canada's decision to toss aside its intellectual property principles is extremely troublesome. In addition, the ink hasn’t even dried on this deal and the EU is already trying to see how much further it can push the envelope on GIs to advantage its producers at others’ expense. This pattern is wrong and so we cannot welcome the news of this breakthrough despite its relevance for the broader EU trade policy strategy.”

All of the ramifications from CETA will not be bad, though, Johansson stressed. Canada exports about $1 billion worth of pork and about $1 billion worth of beef to the U.S. annually, but some of that would likely be diverted to Europe after CETA tariffs fall, giving more of that business to domestic producers, he said.


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