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The EU-Canada Trade Agreement: Clues For US Agreements?
Canada and the European Union recently concluded a sweeping free trade agreement, and while provisions of that agreement are interesting on their own, what’s even more interesting is trying to figure out how a pending US-EU trade pact will resemble the EU-Canada agreement.
Canada and the EU announced back in mid-October that they had reached a political agreement on a Comprehensive Economic and Trade Agreement (for more details, please see “Canada, European Union Finalize Trade Deal; EU Cheeses Will Gain Additional Access,” on page 16 of our Oct. 18th issue).
A couple of weeks later, Canadian Prime Minister Stephen Harper released a technical summary of the CETA, including some dairy-specific provisions (for more details, please see “EU Gains Limited GI Rights To Some Cheese Names Under EU-Canada Trade Agreement; Will Affect Future, Not Current, Users,” on page 1 of our Nov. 1st issue).
Meanwhile, the US and the EU announced back in June that they were going to launch negotiations on a Transatlantic Trade and Investment Partnership (TTIP) agreement. Two negotiating rounds have been held thus far, with a third scheduled to take place later this month.
So, can the US dairy industry gain some clues about the possible provisions of the TTIP agreement from the CETA? And if so, does it appear at this time that the TTIP agreement will be beneficial for the US dairy industry?
As far as the dairy provisions of CETA are concerned, there appear to be two main areas of interest for the US dairy industry.
First, the EU gained quite a bit of access to the Canadian cheese market through this agreement.
Specifically, the total cheese tariff-rate quota for the EU will comprise 16,800 tons (37 million pounds) of new market access, and Canada will fulfill its existing but not yet implemented obligation to reallocate to the EU 800 tons (1.8 million pounds) from the existing WTO TRQ to address new member state accession to the EU.
How significant is this? According to Dairy Farmers of Ontario, the CETA could mean that EU access will total 70.5 million pounds, or 7.5 percent of the Canadian cheese market; and total imports will reach 84.2 million pounds, or about 9 percent of current Canadian consumption.
To put that in perspective, US cheese production will reach about 11 billion pounds this year, cheese exports might total 600 million pounds, and cheese imports might total 300 million pounds. In other words, the US cheese market is somewhere around 10.7 billion pounds.
So if the EU were to be granted access equal to 7.5 percent of the US cheese market, that would total somewhere around 800 million pounds of cheese.
Obviously that’s well above total current US cheese imports, but it’s also worth remembering that this represents potential access, not actual imports. Remember, the current US TRQ for cheese is around 298 million pounds, but that TRQ has not come close to being filled in recent years.
Ah, but that’s not necessarily due to declines in imports of cheese from EU countries. If you go back a decade or so, to let’s say 2002, it’s noteworthy that four of the top 10 sources of US cheese imports were non-EU countries, including number one New Zealand (which exported over 100 million pounds of cheese to the US that year, or almost 39 million pounds more than number two Italy), number five Lithuania (which has since joined the EU), number eight Australia, and number 10 Argentina.
In 2012, just three of the top 10 sources of US cheese imports were non-EU countries, including number four New Zealand, number seven Norway and number nine Switzerland. It would seem that an EU that’s less than a year and a half away from abolishing milk production quotas would be ready, willing and able to take advantage of increased access to the US cheese market.
Of course, the US also stands to gain greater access to the EU dairy market. But given the current dairy trade imbalance between the US and the EU, it would seem that the EU will be better positioned to take advantage of increased market access than will the US.
The other main area of interest for the US dairy industry in a TTIP with the EU is in the area of geographical indications. Under CETA, some EU GIs were protected but with the caveat that they not impact the ability of producers to use specific terms that are commonly employed in Canada.
Among the terms that will continue to be free for use in the Canadian market: Parmesan cheese. Limited GI rights are provided to the EU on Feta, Asiago, Fontina, Gorgonzola and Muenster. CETA won’t affect the ability of current users of these names in Canada to continue use, but future users will be able to use the names only when accompanied by expressions such as “type” or “kind,” such as “Feta-type” cheese.
This is obviously a potential major problem for the US cheese industry, which has seen production of some of these cheeses grow impressively in recent years. It would be unacceptable for the EU to gain protections under the TTIP for cheese names that have been in common use in the US for decades now. But the EU will most certainly try to gain some protections.
All of which leads to one other general area of concern for the US dairy industry. Some reports on the CETA concluded that Canada chose to sacrifice dairy interests for gains in other areas. So when US negotiators are hammering out a deal with the EU, will they be willing to sacrifice the US dairy industry in exchange for boosting other industries? DG
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