Recent news that the European Union (EU) and Canada free trade negotiations are at the final hour, but have stalled on agriculture-related issues should come as no surprise. Both sides maintained rigid ag trade positions well before the discussions started four years ago. Negotiations on the topic seemed to be carefully dodged as other non-agricultural concerns were resolved.
During that time it was amusing to see Canadian agricultural lobby groups jockeying for the attention of our trade negotiators in an effort to influence their intentions on the fate of particular commodities. We may soon know that outcome as the chief EU trade negotiator will be in Ottawa in early February to ostensibly conclude the negotiations. If that happens I fear that certain sectors of Canadian agriculture will get the short end of the stick.
The reason for apprehension is that when it comes to ag trade issues it seems to be all going according to the EU script, the most blatant being on beef trade. The EU won the early rounds and shows no signs of wavering, and that’s mostly due to Canada and the U.S. giving up so easily and so naively. I cite the capitulation of both countries on the beef hormone issue in giving up hard-fought-for retaliatory tariffs for what turned out to be bogus quota access to the EU beef market. Another reality is that the EU has no intention of giving Canada a single pound of beef-import advantage over the U.S. and certainly not over traditional suppliers like Argentina.
It gets worse for more beef access when the EU internal geopolitical process gets involved. First some background. The accepted notion in the past was that as EU beef production decreased a new market would open up for North American beef. That decrease was coming from less subsidization of EU cattle and beef production and a steady increase in onerous environmental and regulatory hurdles, all of which was making EU production too expensive.
However, a new development — EU expansion — changed that accepted trade progression. New EU members brought into the fold thousands of small-scale farmers in eastern Europe. Clearly internal EU agricultural free trade was going to impact those operators, particularly those in marginal areas. The question arose of how could those folks be kept on the land. One of the brainstorms was to get them to raise the beef cattle that western Europeans could no longer afford to produce. How does one help that initiative? First you stop or thwart the potential flood of beef imports from North America that might result from reducing tariffs and eliminating quotas in a free trade agreement. This type of EU internal political/social reality may trump any real changes to EU beef-import policy.
Five years ago while on a media junket to EU headquarters I discussed the beef import situation with the then-EU agriculture commissioner. At the time he stated that the EU would never change its position on the beef hormone issue no matter what the WTO decided. He also stated that the EU would never allow tariff- or quota-free North American beef into the EU. So far devious EU trade manipulators have outfoxed both Canada and the U.S. on both accounts. It seems their script is being followed.
I suspect that our negotiators have probably offered the EU significant access for tariff- and quota-free EU cheese imports in exchange for more Canadian beef access. But that may not be enough of a reward considering some other factors surrounding EU beef imports, a possible EU/U.S. free trade agreement being the snake in the room. I expect a EU/Canada free trade agreement will be announced soon, but it will probably not include unfettered access to EU markets for Canadian beef. That’s not in the EU long- range script for agriculture in their market.
You can expect some fiddling around the edges of present tariffs and quotas, but nothing close to what should be in place. If the EU does relent, it has a nasty habit of subsequently tying up any concessions with red tape, health barriers and regulatory traps. The fear I am sure is that Canada will agree to any crumbs on the beef issue just to get a freetrade agreement in place before the EU begins negotiating with the Americans. Perhaps Canada will agree if we also receive any trade concessions on beef that the Americans will subsequently get from the EU.
Another trade irritant that seems to get a lot less public attention is the EU position on genetically modified (GM) commodities such as canola, corn, soybeans and others. The EU continues to maintain trade barriers despite all scientific evidence. Is that because our negotiators gave up on that issue early in the process? I would suggest that unfettered access to Canadian GM commodities and food products would be more of an economic benefit than more beef access. In the bigger picture, it’s EU intransigence on genetic engineering that thwarts the development of GM wheat, potatoes, rice and others that could make such a huge difference to viable food production in every part of the arable world. Interestingly the EU does permit some GM ingredients in cheese production, but I digress.
From news reports and government pronouncements I sense some urgency has developed in concluding the EU/Canada freetrade agreement sooner rather than later. When that attitude develops in negotiating circles, compromise and concession tend to be the order of the day. That generally works out OK if both sides are somewhat equal. But in this case the EU is the big dog and they want to start dealing soon with that really big dog — the U.S. I suspect in that rush, Canada and our agriculture industry may not fare as well as we might have planned. I do hope I am wrong.