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Meeting of the Committee on Agriculture and of the Canada-EU Agriculture Dialogue – September 12, 2023

Ottawa

Report

Summary

The sixth meeting of the European Union-Canada Comprehensive and Economic Trade Agreement (CETA) Committee on Agriculture took place in Ottawa on September 12, 2023, together with the Canada-European Union Agriculture Dialogue. Both parties continued their commitment to maintain a positive collaborative approach, noting the positive contribution of CETA, the success of the sustainability workshops and their ongoing commitment to food security particularly in light of the Russian invasion of Ukraine. 

CETA Committee on Agriculture

CETA implementation

Review of bilateral trade

Canada and the EU conducted a review of bilateral trade data. Canada noted that its largest exports to the EU in 2022 were soybeans, wheat and cereals. The EU stated two-way trade with Canada had grown, with wines and spirits as top export products to Canada, adding that there is  increasing diversity in the range of  Canadian products entering the EU market. Overall, CETA continues to provide significant opportunities for both parties and is a key factor in maintaining strong supply chains between the EU and Canada, which is especially important considering the current challenges of food price inflation and global food insecurity.

EU beef and pork tariff rate quotas (TRQs)

Canada reiterated its concerns with the administration system for CETA beef and pork TRQs which, in its view, lacks consistency with the negotiated text, whereby any unused or unallocated quota following the initial allocation period would be allocated via a system that issues licences automatically on demand. Canada explained the EU remains an attractive market to Canadian producers, since there is substantial demand for high quality cuts of meat in the EU market. However, Canada considers that the EU deforestation regulation is a new barrier to trade, and that existing sanitary and phytosanitary (SPS) requirements for meat products represent an impediment to Canadian exports and utilization of the CETA beef and pork TRQs. The EU took note of Canada’s concern however, maintained that its administration of TRQs  is in  compliance with CETA and recalled  the process of quota allocation administrations.

Canadian cheese tariff rate quotas (TRQs)

The EU expressed its continued concerns with the cheese tariff rate quota (TRQ)  management system, and disappointment that the comprehensive review is not yet finalized. For the EU, the pooling system fails to meet the CETA obligations to provide a mechanism that allocates TRQ to operators “most likely to use it” and minimise transaction costs, given the  reportedly high level of transfers and related transfer costs. The EU reminded Canada that it had called for the introduction of disciplines on chronic/abusive transfers and transparency in its submissions to the comprehensive TRQ review. The EU also noted that the market-share based allocation creates a barrier to new entrants.  It pointed to complaints from importers of EU cheese facing rising costs due to the need to hire dedicated  personnel  to administer the licencing system. This is a further challenge for new entrants, particularly small companies, from benefiting from the new market access under CETA.

Canada noted the EU’s concerns and that of its stakeholders, highlighted the high fill-rates of the Cheese TRQs since their inception, benefits of the licencing transfer system (which add utilization), and expressed its openness to discuss the EU concerns further in upcoming meetings. Canada stated that it understands there are certain stakeholders, both domestically and internationally, who have seen changes to their competitive position with the implementation of various new free trade agreements (FTA), but further explained that the Canadian importers overall have adapted well to a changing cheese import market and are fully utilizing the CETA Cheese TRQs. Canada further stated that its TRQ policies fully comply with obligations. Canada voiced its intention to restart the comprehensive review of TRQ of the cheese TRQs which have been disrupted because of ongoing trade disputes.

Other trade issues

Update on EU and Canada’s international trade negotiations

Canada provided an update on their international trade negotiations and acknowledged the current priorities focused on the United Kingdom after Brexit and initiatives in the Indo-Pacific region. Questioned on the UK’s temporary access to the EU reserve under Canada’s World Trade Organization (WTO) cheese TRQ, Canada confirmed as per the side letter that imports of cheese from the UK would become eligible under the non-EU reserve of Canada’s WTO Cheese TRQ as of January 1, 2024. Canada acknowledged the conclusion of the negotiations for the UK’s accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and updated on its negotiations with Indonesia and continued progress with the Association of Southeast Asian Nations (ASEAN).

The EU briefed on its negotiations with New Zealand which includes commitments on sustainable food systems and animal welfare. The EU continues its negotiations with Australia. The EU reported a recent milestone achieved with India which resulted in an exchange of market access for goods and government procurement proposals. The EU is working internally on ratifying and implementing modernized bilateral FTAs with Chile and Mexico and pursuing additional side instruments on deforestation and labour rights with Mercosur.

EU regulation on deforestation (EUDR)

The EU noted that the EUDR has received increased interest internationally. From the start of implementation in December 2024, all commodities and products listed in Annex I of the Regulation will have to be confirmed as deforestation-free. The list of commodities and derived products were based on objective data as having the highest impact on deforestation. The EU acknowledged Canada’s concerns regarding the legislation’s impact on trade, especially for Canadian exports of products of cattle, soy,  timber and composite products but  maintained the regulation would not differentiate between the EU  and foreign suppliers. The EU stated it is working to ensure the measure will not restrict trade and to help its trade partners adapt to the new import requirements.

Canada emphasized its strong record with a deforestation rate of less than 0.2%. In addition, Canada raised strong concerns about the feasibility and effort required to report geolocations of plots of land, given the need to consider the entire value chain. Canada looks forward to discussing the technical elements of the EUDR during upcoming meetings; however, it maintained that a reasonable adjustment period must be established for Canadian industries to adjust to this new regulation.

EU Veterinary Medicinal Products Regulation (VMP)

Canada reiterated the importance of maintaining an open and transparent approach toward the implementation of the VMP regulation to understand its impact on trade with third countries. Canada also requested a reasonable transition period to ensure there is sufficient time to adapt and comply with any additional measures. Both parties committed to continuing their discussions on the regulation during the upcoming CETA Joint Management Committee for Sanitary and Phytosanitary Measures (‘CETA SPS Committee’)  meeting. Canada noted the Canadian Food Inspection Agency would submit questions on the regulation ahead of this meeting and that it shared the EU’s view that antimicrobial resistance represents a serious public health concern.

EU regulatory approach to pesticides

Canada raised this topic given its interlinkages with the EU’s Farm to Fork Strategy and expressed concerns over the EU’s approach to pesticide regulation and its impact on Canadian exporters. Canada reiterated that any changes to pesticide Maximum Residue Levels (MRLs) should be based on a dietary risk assessment and asked that MRLs and import tolerances for substances that do not pose unacceptable dietary risks are maintained. Additionally, Canada expressed concerns regarding the EU’s decision to revoke the MRLs for two neonicotinoids. Canada considers  this measure to be more trade restrictive than necessary and does not believe it will achieve the  EU’s goal of protecting the global pollinator population since it does not  take into account existing initiatives led by third-party countries, such as Canada, to mitigate the environmental impacts of these products. Canada also expressed disagreement over the EU approach to revoke MRLs based on environmental concerns rather than consumer safety and without recognition of other country environmental measures.

The EU  acknowledged Canada’s concerns and noted that this issue would be addressed in the CETA SPS Joint Management Committee.  

Update on the EU Food Information to Consumers Regulation

Canada reiterated its stance that any new country of origin (COOL) measures should be trade facilitative and harmonized at the EU level. Further to this, Canada reiterated that unilateral labelling legislation from member states would lead to a patchwork approach, which would be burdensome for Canadian exporters and a barrier to trade.

The EU stated the European Commission’s intention  to provide a legal harmonized system for this initiative. Because of other legislative priorities, there have been delays with the revision of the Food Information to Consumers Regulation.

Canada-European Union Agriculture Dialogue

CETA evaluations by European Commission and European Parliament

The European Commission is currently preparing a 6-year ex-post evaluation of CETA, which is expected to be completed in 2025.  The European Commission’s objective is to publish an evidence based ex-post evaluation of CETA analysing its economic, social and environmental impact after five years of provisional application. This includes an external study which will  analyze the effectiveness and efficiency of CETA in all areas of its application,  address criticisms of CETA seen in recent years and develop recommendations for areas to be further developed or improved. The study is expected to finish  early in 2025. The evaluation process will also include stakeholder consultations.  The study and stakeholder consultations will feed into a final staff evaluation report by European Commission which is slated for adoption by the European Commission in 2025. In parallel, the European Parliament has launched its own-initiative review of CETA, to be adopted in early 2024.  

Canada expressed its interest in assisting in the EU processes and its desire to be kept abreast of the progress of both evaluations. Canada also noted its publication of CETA@5 and stated that in 2022 there was overall growth in trade in goods  of over 50% since CETA implementation.

Food security in the context of the Russian Invasion of Ukraine

At the request of the EU,  Canada provided an overview of its role in the global potash sector and what this means for food security.

In 2022, Canada, as the world’s primary supplier, accounted for 38% of global potash production, up from 32% in 2021. Ninety percent of Canadian potash was exported with the United States being the primary destination, followed by Brazil and China. In that same year, approximately 5% of Canadian potash was exported to the EU.  Potash is on Canada’s Critical Minerals List in a reflection of potash’s importance for food security, and Canada’s role as a secure and sustainable global supplier. No substitutes exist for potassium as an essential plant nutrient and as an essential nutritional requirement for animals and humans.

Canada, Russia, and Belarus accounted for 74% of potash traded internationally in 2022. Due to a decline in supply from Russia and Belarus, global production of potash declined by roughly 10% in 2021. Plans from Canadian companies to increase production and exports have recently been scaled back due to weak markets and logistical challenges as well as an unexpectedly rapid expansion of the Belarussian output. However, Canada is expected to remain the world’s largest supplier of potash, and new  investments , with startup targeted for 2026, will represent a significant increase to Canadian potash production.

Update on EU’s Animal Welfare Regulatory revision

Canada is closely monitoring developments in the EU concerning updating  the legislation and requested adequate time for Canada and Canadian stakeholders to submit comments and reasonable transition times to adapt to any new requirements for third country exports.  

Canada-EU Dialogue on Sustainable Agriculture

Both sides acknowledged the success of the initiative to hold a series of joint workshops aimed at promoting sustainability, environmental stewardship and climate action in agriculture, which was launched at the Canada-European Summit in June 2021. The workshops have increased mutual understanding and allowed an exchange between practitioners, scientific experts and policy makers on best practices. Five workshops have taken place to date on the topics of soil health, livestock emissions, organic farming, fertilisers and pesticides. The EU-Canada Stakeholders’ Conference planned for December, will further provide an opportunity to reflect on lessons learned, with both sides expressing their desire to continue the dialogue in the future. 

Progress on sustainability initiatives:

Canada: Sustainable Agriculture Strategy and Sustainable Canadian Agriculture Partnership

Canada outlined  the work  of its Taskforce for International Engagement on Environment Issues, the role of which is  to respond to sustainability issues arising in different international fora. Canada also noted the Sustainable Agriculture Strategy (SAS),  planned for release in Winter 2024 which will set the direction for action on agri-environmental issues, although setting targets is still under discussion. Further to this, Canada explained the Sustainable Canadian Agriculture Partnership (S-CAP) an investment of $3.5 billion over 5 years with priorities including climate change and environment; sector capacity, growth and competitiveness, which includes initiatives on diversity; science, research and innovation; market development and trade; and resiliency and public trust.  S-CAP is also looking at how to integrate climate considerations into business risk management programs. Canada also updated the group on the establishment of the network of Living Labs, that now has at least one site in each province, and mentioned the first International Forum on Agroecosystem Living Labs taking place shortly in close collaboration with a number of EU partners.

EU: Carbon Removals Certification Framework, Nature Restoration Law, & Soil Health, Member State implementation of Common Agricultural Policy and eco-schemes

The EU provided an updated on the progress of key sustainable initiatives of which the Carbon Removal, Nature Restoration and Soil Health are the core of the EU’s Green Deal.

Carbon Removals Certification Framework (CRCF)

The CRCF proposal was adopted by the Commission in November 2022 and follows all climate initiatives approved toward climate neutrality in 2050. The EU strengthened targets on land-use and forestry in recognition with the need to increase capacity to remove carbon in the atmosphere and sequester carbon  in farmland. The EU noted the opportunities provided by carbon farming for land managers and underscored the challenge of certifying carbon removals and calculating credits to farmers for costly value added practices. Further to this, the EU attributed four principles for granting credits: 1) quantification method (measure and quantify carbon accurately);  2) additionality (reward farming practices that go beyond business as usual); 3) long-term permanent storage (difficult to monitor and control) ; and 4) sustainability trade-offs (could come at expense of other environment objectives).

Questioned by Canada on whether other international certification systems would be recognized for the CRCF, the EU elaborated that all certified uses must comply with EU law and the methodology for issuing certification for carbon farming will be further laid down in specific rules (delegated act) in the course of 2024.

Nature Restoration Law

The EU nature restoration law initiative has been heavily debated by co-legislators. The goal of this initiative is to restore biodiversity to satisfactory levels by 2050, with several targets affecting. e.g. agriculture, pollinators, restoring habitats, and high nature landscape features. During a plenary session in July, Parliament decided to negotiate the terms of the law.  The EU stated that member states would need to decide on nature restoration plans, and given the law’s ambitious targets, address the investment gaps. The EU remarked the ability to fulfill financial gaps during the next budget.

Soil Health

The soil monitoring law was proposed in June 2023 and marks a major turning point for soil sustainable management in the EU. Most of the soils in the region are degraded and require restoration. The EU explained it has put together a robust monitoring framework to ensure that member states have accessible data on the quality of soils. The EU referenced its diverse topography and that member states would need to take necessary measures to adapt to their specific area needs. There are several targets outlined in the soil health law with a long-term goal of achieving healthy soils by 2050.

Canada discussed the potential of extraterritorial trade implications due to the soil monitoring law and was informed by the EU that the proposal would affect land managers operating in Europe and member states would be responsible for establishing monitoring and financing. The EU mentioned that they do not foresee any international spillover effects from this law.

Member State implementation of Common Agricultural Policy and eco-schemes

The EU outlined the Farm to Fork Strategy, which is part of the European Green Deal, as structured along the supply chain. The Common Agricultural Policy (CAP)  is targeted towards all three dimensions of sustainability  i.e. environmental, economic and social. One of the goals under CAP is to increase organic production to 25% of the agricultural area by 2030, and support generation renewal by investing €.8.5 billion in young farmers by 2027.  Further to this, the EU noted the overall CAP spending as share of gross domestic products (GDP) had decreased, with greater spending on green payments and less on coupled support. The EU described possible upcoming initiatives housed under the F2F including nutritional labelling, origin labelling, minimum mandatory criteria for sustainable food procurement, EU promotion programme and EU school scheme. The aim of these initiatives is to promote a shift towards diets that are sustainable and healthy.

Canada remarked on the similarity in the types of challenges faced by both jurisdictions and underscored the difference in approach by both parties.

Participants

Canada

Co-Chair: Agriculture and Agri-Food Canada, Director, Europe, Middle East and Africa Division

European Union

Co-Chair: European Commission, Directorate General for Agriculture and Rural Development, Head of Unit The Americas

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