Third Meeting of the EU-Canada CETA Committee on Agriculture

Video conference, 21-22 September 2020

Report

The third meeting of the EU-Canada Comprehensive and Economic Trade Agreement (CETA) Committee on Agriculture took place online on 21/22 September 2020. Both parties continued with a positive collaborative approach, noting the importance of the EU-Canada relationship, the contribution of CETA, the need for reliable and like-minded trading partners.

CETA implementation: Review of bilateral trade data

Both parties noted that trade had expanded again in 2019, to the benefit of both EU and Canada, with a slight narrowing of the EU’s trade surplus with Canada, in agri-food products. The intention of both parties is to use this Committee to move towards removal of impediments to development of business opportunities, to enable both sides to take full advantage of CETA.

EU beef and pork TRQs

Canada reiterated the political and economic importance of working together with the EU to increase utilization of the CETA meat tariff rate quotas (TRQs). Canada thanked the EU for its help in drafting a guidance document on the meat TRQs that can be used by Canadian exporters and EU importers. Canada noted that the Canadian meat industry is increasing their investment in order to comply with EU sanitary and phytosanitary requirements. Meat TRQs remain largely under-utilized. Although there was 35% growth in volume of fresh beef exports to EU-27 in 2019 compared to 2018 the fill rate remained the same at 3.1%. Similarly, while the first eight months of 2020 have seen a 65% increase in volume of fresh beef the TRQ fill rate only reached 4.1%. Canada renewed its concerns that the EU TRQ administration system for the CETA beef and pork TRQs fails meeting the CETA obligation to provide a mechanism whereby import licenses can be issued automatically on demand when unused and/or unallocated quantities are available following the initial application period. Canada considers that this will become increasingly problematic when Canadian producers begin to export higher quantities to the EU. Canada also asked for data on import quantities, to facilitate tracking of quota utilization.

The EU informed Canada about its new legal framework for TRQs, aimed at simplification. It reminded Canada how its shared management system for TRQ administration works, including the allocation process of unused quantities, which are automatically made available the following month. The recently adopted EU regulations 2020/760 and 2020/761 (December 2019) on the management of TRQs will require license holders to report on unused quantities starting January 1, 2021. Interested stakeholders will be able to access publically available data to calculate import volumes under the CETA TRQs. The EU considers that it has fully complied with CETA by putting in place a TRQ administration system that is as conducive to trade as possible.

WTO beef and pork TRQs apportionment linked to Brexit

Canada sought assurances from the EU that the TRQ apportionment will not affect the EU’s bilateral part of the commitments under CETA. Negotiations on the TRQ apportionment are ongoing with WTO members, including Canada.

Canadian cheese TRQs

The EU reiterated the political and economic importance of the cheese TRQ for the EU. The EU made reference to its submission sent in the framework of the TRQ Comprehensive Review undertaken by Canada, which was temporarily suspended due to the COVID crisis. The EU asked when the review process would be resumed and indicated it counted on Canada to address the EU concerns as detailed in the submission. The EU reiterated its concerns that the cheese TRQ management system fails in its CETA obligation to provide a mechanism by which the TRQ is allocated to operators most likely to use it. The EU stressed that in its view, the high rates of transfers and related transfer costs reflect structural problems in the TRQ management system. The EU referred to last year’s meeting when Canada indicated they were considering possible amendments to the transfer mechanism and increased transparency under the comprehensive review. The EU pointed to other technical issues, such as the element of transfers as part of the utilization rate calculation, which the EU believes should not be considered. The EU stated that they expect the review to deliver progress in making the system easier for EU operators.

Canada remarked that it understands that the cheese TRQs are an important issue for the EU. In that regard, Canada stated that it is fully meeting its CETA obligations in regard to TRQ administration. Canada pointed to the very high fill rate of the CETA cheese TRQs (around 96%) as a clear indication that the TRQs are working for EU industry. Canada also noted that the utilization rates, to date, for both TRQs are already well ahead of last year’s pace. Canada explained the current disciplines in place for transfers under the CETA TRQs and reiterated that transfers are a useful mechanism to ensure high utilization rates. Canada welcomed the EU’s contribution to the comprehensive review and clarified that the review process will be resumed once conditions allow. Canada stated that the topics of transfers and increased transparency are being discussed as a part of the review, but no commitments would be made on these issues until the end of the process. Canada informed the EU that it had implemented a revised transfer allocation form, which would provide better information on what is happening in the industry. The EU requested that Canada share any non-sensitive information, at aggregate level.

Canada sugar countervailing duties

The EU has made a submission to the Canadian authorities, which calls for the expiry of countervailing duties (CVD). Agriculture and Agri-Food Canada took note of the EU’s concerns, and stated that it has no influence on the review process. The CVD is set to expire on Oct 29 2020, unless the Canadian International Trade Tribunal (CITT) decides to conduct an expiry review. The Tribunal is expected to decide on October 2 2020.

Wheat gluten anti-dumping (AD) investigation

The EU expressed surprise that Canada is conducting this investigation, as it appears that gluten exports increased with entry into force of CETA. The EU is concerned that the benefit of elimination of tariffs might be offset by AD duties. A further concern for the EU is that the complaint is examining EU subsidies in the context of an AD investigation. The EU considered that Canada should refrain from implementing an AD methodology directly targeting the EU’s support to agriculture and biofuels. Agriculture and Agri-Food Canada indicated that although it is aware of this investigation, the CITT and the Canadian Borders Agency (CBSA) carry out such investigations independently. Canada’s view is that the trade remedy system is consistent with WTO rules. The CBSA is responsible for determining whether dumping is occurring. The CITT, for its part, is responsible for determining whether imports of the dumped goods have caused or are threatening to cause injury to Canadian producers of similar goods. The preliminary determinations for the CITT and the CBSA are expected on October 13, 2020 and November 12, 2020 respectively. If the result of either preliminary investigation is negative, the whole procedure would stop. If however the result is positive, temporary duties may apply.

Milk class 7

The EU requested an update from Canada on the state of play regarding Milk Class 7. Canada informed the EU that Canadian industry had eliminated Milk Class 7, ahead of its Canada-United States-Mexico Agreement (CUSMA) commitments, with products now classified as Class 4.a. Milk prices are still set by provincial authorities. Information on prices is available on federal government websites. Canada pointed out that the EU continues to enjoy duty free access to Canadian market for milk proteins substances and also that Canada is a very small player globally. Nevertheless, the EU indicated that it would reserve judgement in light of market developments as to whether this amendment responds to its concerns.

Canadian food origin labelling legislation

In Canada, responsibility for food labelling is shared between Health Canada and the Canadian Food Inspection Agency (CFIA). Health Canada establishes safety and health related labelling, with CFIA responsible for other food labelling requirements. Both are revising their requirements, and have consulted on draft proposals. Due to the impact of COVID-19 pandemic on stakeholders and government, timelines for all Canadian regulatory initiatives were delayed. It is expected that CFIA will announce its’ timelines of publication by mid-December. Canada thanked the EU for its comments submitted to CFIA in 2019, which will be taken into account in the drafting of the final text.

EU Skim Milk Powder (SMP) Intervention Programme

Canada raised concerns that the EU’s SMP Intervention Programme negatively impacted global prices. The EU stated that the sale of product out of Intervention in 2018-2019 was closely managed to ensure no market disturbance. The EU monitors market prices on a weekly basis. According to the EU, these prices were used to establish a minimum selling price at the monthly tenders, without incentivising exports. The EU stated that prices were falling in 2015-2016 not only in the EU but also in the US and it was only when EU started intervention that prices stabilised, not only in the EU but also in the US. Sales from intervention took place only after prices started recovering, in the EU and all over the world. The EU explained it does not impose conditions on end-use, and so does not know where intervention products go once they are sold. Canada continues to have concerns on the EU Intervention Programme and its conformity with EU trade obligations.

EU country-of-origin labelling for primary ingredients

Canada raised its continued concern about national country of origin labelling measures and their impact on the EU single market. The EU acknowledges consumers’ growing interest in food labelling and the need for a long-term solution to national labelling schemes. As part of its implementation of the Farm to Fork strategy, EU will consider the extension of mandatory origin labelling to certain foods. The EU will conduct an impact assessment (IA), which will include an examination of the potential impact on third countries and compatibility with the EU’s international obligations and will be open to consultation. Based on the outcome of the IA, the EU intends to make a proposal in 2022. Canada called upon the EU to take Codex standards into account. Canada advised it will be monitoring this process closely.

EU Veterinary Medicinal Regulation

Canada expressed concern about the potential trade impact of the EU’s Veterinary Medicinal Products Regulation. Canada stated that while it shares the EU’s concerns on antimicrobial resistance, it hoped that EU Regulations will respect international rules and sought assurance that there will be sufficient time for trading partners to submit their views. The EU appreciated the fact that both the EU and Canada shared the view that antimicrobial resistance represents a serious public health issue that should be tackled globally. The EU recognises good cooperation with Canada on this issue and committed to continue working on a risk-based approach in full transparency. This issue will be on the agenda of the CETA Sanitary and Phytosanitary Measures Joint Management Committee (SPS JMC) in November. The EU also thanked Canada for its cooperation in implementing a regionalised approach to the African Swine Fever crisis.

Hazard-based decision making

Canada raised concerns with the potential impact on trade of the EU’s hazard-based decision-making and approach to assessing plant protection products and impacts on cut-off criteria for import tolerances. Canada wants to work with the EU to identify opportunities and find solutions that avoid any trade impact. Canada emphasized the importance of timely SPS notifications for revised maximum residue levels (MRLs) consultation with trading partners as a high degree of trade uncertainty is being created by the lack of clarity, predictability and timelines on how EU import tolerances will be set. Canada also noted its concern regarding emergency authorizations by Member States for previously banned pesticides which understandably, could be an important tool for domestic producers to save a crop, however puts farmers in exporting countries at a disadvantage. The EU explained that the pesticides legislation is risk-based, except for a minority of substances for which cut off criteria are applied in cases where the hazard is very serious and any exposure is considered very risky. The EU also referred to its Farm to Fork strategy, which has a strong focus on sustainability and announces that environmental concerns could in future be taken into account for setting import tolerances. The EU suggested holding a more in-depth discussion on this topic in the framework of the upcoming CETA SPS JMC.

Proposals for Nutrition labelling

Both EU and Canada are developing ideas on nutritional labelling aimed at informing and facilitating consumer choice. The EU will come forward with a proposal by the end of 2022, as part of the Farm to Fork strategy. In the case of Canada, the process has been delayed due to COVID-19, but Canada will inform the WTO when it is ready to progress.

Sustainability certification of Canadian canola

Canada reported on its ongoing work with the European Commission (DG Energy) to certify Canadian canola as a sustainable input into European biofuel production under the EU Renewable Energy Directive. Given the importance of the European market for Canadian canola growers and the sustainability of Canadian canola, Canada is working with the EU on a technical level towards getting its methodology certified as meeting EU requirements. The EU will communicate to DG Energy that this issue was raised by Canada and invited Canada to continue to work closely with DG Energy, as this is a matter of renewable energy policy and not specifically related to trade of agricultural goods.

EC Product Environmental footprint

EU presented its pilot scheme to Canada. Canada advised it would welcome the opportunity to comment on the EU’s proposal.

COVID 19 – rescue packages and market impact

Both EU and Canada took measures to protect their supply chains and to support farmers. The aim is to mitigate the impact of COVID on agriculture, given the critical role the sector plays. The EU measures had a limited budget, and have not been fully utilised. Temporary state aid flexibility was also granted to facilitate a quick response. Turning to the market impact, both sides acknowledged the need to continue working multilaterally to keep trust in agri trade. One of the big questions is how to reconcile the demand for short food chains and local production, and the need to secure global trade to ensure food security.

Canada’s Food Policy

Canada outlined its Food Policy for Canada, launched in June 2019. The vision is that all people in Canada are able to access a sufficient amount of safe, nutritious, and culturally diverse food; Canada’s food system is resilient and innovative, sustains their environment and supports their economy. The Policy is working to achieve the vision and outcomes through bringing diverse perspectives together; adopting a food-systems based approach that considers interdependent social, health, environmental, and economic components; and enhancing coherence among policies that affect or are affected by food. Canada welcomed the opportunity to continue to engage and benefit from the experiences of the EU and Member States to improve food-related outcomes.

Organic agreement

The EU informed Canada of the Commission proposal to postpone the entering into force of its new organic regulation (Regulation (EU) 2018/848) by one year, to 1st January 2022. The proposal also foresees the postponement by one year of the expiration date of the organic equivalency recognition granted by the EU on the basis of Regulation 834/2007. This proposal by the Commission is undergoing adoption by the Council and the European Parliament. If the EU proposal is adopted, the current recognition of Canada’s organic rules by the EU will continue until December 2026.

Following the new rules on organic aquaculture adopted by Canada that will come into force in January 16, 2021, the EC is assessing possible ways to avoid trade disruption, in light of postponement of the expiration date of the current organic recognition.

Farm to fork

EU outlined its Farm to Fork strategy, which is agriculture’s contribution to the Green deal, the EU’s response to the global call to protect the environment. It is about quantified objectives for the EU primarily. Agriculture has to deliver on the objective of climate neutrality and reduce nutrient losses in soils, reduce pesticide use by 50%, reduce fertiliser usage by 20%, reduce 50% the sales of antimicrobial agents, double the area of organics to reach 25% and reduce food waste. Once the Council and the European Parliament validate the objectives, legislative proposals will follow. The EU is looking to build Green Alliances with like-minded trade partners and offered its help in providing Canadian stakeholders with information sessions to better understand the Farm to Fork strategy and its potential impacts on trade. Canada would like to explore opportunities for further collaboration.

Update on international trade agreements

Canada updated the EU on the entry into force of the Canada-United States-Mexico Agreement (CUSMA) on 1 July 2020, as well as on negotiations with Mercosur and the United Kingdom, and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) accession process. The EU updated Canada on its international trade negotiations as well as on its relations with the US.

Research and innovation

EU and Canada presented ongoing projects and collaborative activities under Horizon 2020.

Participants:

European Union:
Co-Chair: European Commission, Directorate General for Agriculture and Rural
Development, Head of Unit A3 (The Americas)
European Commission, Directorate General for Agriculture and Rural Development
European Commission, Directorate General for Trade
European Commission, Directorate General for Health and Food Safety
Delegation of the European Union to Canada

Canada:
Co-Chair: Agriculture and Agri-Food Canada
Agriculture and Agri-Food Canada
Global Affairs Canada
Mission of Canada to the European Union
Canadian Food Inspection Agency