The EU trade deal: probably the best dairy could have hoped for

Thursday, December 5, 2013

The dairy industry is not happy with the concessions granted to European cheese producers, but how much resource and credibility is it worth spending to combat it?

by BARRY WILSON

As November dawned, Canada's dairy lobby found itself fighting perceived threats on two fronts – a potential change to government policy and a trade deal it says undermines the industry.

First, consider the perceived political threat. In Calgary, Conservative Party delegates gathered for a biennial party conference to debate policies aimed at influencing the 2015 Conservative election platform. One proposed policy sponsored by four Alberta Conservative riding associations called for "an orderly transition away from supply management."

That quickly was dealt with when, on the first day of the convention in a policy workshop free from prying journalist eyes, agriculture minister Gerry Ritz led an assault on the proposal. It was overwhelmingly defeated, never to be debated in public where the critics could have their say. Fire doused.

However, the trade issue lingers. For most Canadian farm sectors, the government announcement of agreement-in-principle on a Canada-European Union (EU) trade deal was good news.

Once the final details are worked out and all sides ratify the deal, it promises sharp reductions in tariffs and improved market access for agricultural products ranging from beef, pork and bison to grain, oilseeds and pulse crops.

The Canadian Agri-Food Trade Alliance estimates that once the agreement is fully implemented, it will be worth $1.5 billion in added agriculture export value or more.

But dairy industry leaders saw only bad news. The deal will double the amount of European cheese allowed into Canada, leading Dairy Farmers of Canada (DFC) to scream "sellout" and to launch a campaign to reverse that concession. Chances are slim to none.   

At least in public, dairy leaders have not been pacified by government arguments that it is a good deal for the industry. The government argument is straightforward: An expanding Canadian market for cheese will more than make up for the additional cheese within several years and, despite the increased imports, the Canadian industry should not see sales decrease.

The Canadian industry still will be guaranteed 92 percent of the domestic market and, besides, the Europeans explicitly accepted Canada's supply management system with its import controls, production controls and price setting.

As a clincher, the government notes that it has negotiated open tariff-free access for Canadian dairy sales into the usually protectionist European market of 500 million consumers. If there is some short-term damage to industry income, Ottawa has promised unspecified compensation.

"This is a good deal for dairy and it preserves the fundamentals of supply management, which is what they asked us to do," agriculture minister Ritz said when the industry reacted badly.

DFC has not been mollified by the arguments. It is using its website to call for dairy producers to lobby this "bad deal" that "puts dairy farmers at risk."

"This agreement would allow the EU to ship an additional 16,000 tonnes of fine cheese and an additional 1,700 tonnes of industrial cheese into Canada" DFC says. "This amounts to the government giving away 32 per cent of the Canadian farm cheese market to Europe." Besides, it is unfair competition because EU dairy farmers are subsidized.

Almost certainly, the Conservatives will not jeopardize a multi-billion dollar deal for this.

For DFC, the question is how much resource and credibility to invest in a battle it cannot win.

In a trade world where some policy modifications are inevitable, it probably is the best deal they could have hoped for. BF

Barry Wilson is a member of the Parliamentary Press Gallery specializing in agriculture.