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Ratifying CETA was the easy part

Now comes the hard work of dealing with domestic effects, like opening markets to dairy imports

Looks like we are going ahead with CETA after all. After a few meltdowns and temper tantrums, both sides are now willing to ratify the deal. In the aftermath of several anti-trade occurrences in recent months, having a deal with the EU is nothing short of a miracle. CETA was initially about growth and prosperity, and how both continents can facilitate more trade across the Atlantic. But in the end, the deal was ratified not for what can be gained, but what would have been lost. Europe is saving its global face, while Canada has an opportunity to recalibrate its foreign trading ambitions in agri-food.

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While Canada remains an insignificant trading player globally, Europe needed to signal to the rest of the world that it remains open for business, despite its recent union-related woes. Economically, because of Russian embargoes, the EU is desperate to find new markets for their food products. CETA may likely ease the deflationary pressures that Europe has been feeling for some time now.

With Brexit, the potential gains from CETA for Canada are not as significant, but better access to the European market is good news, nevertheless. Canada’s cattle and hog industries are desperate to reach new markets, and CETA will help to do this in the long term. Canada’s supply management sectors have been needing a wake-up call from outside its borders, and that is exactly what CETA will deliver. With the influx of high-quality, more affordable dairy products, Canada’s dairy industry will now have to redefine itself within a more competitive landscape.

In Canada, domestic dairy processors have been preparing for this ratification for years, as massive investments from Saputo, Agropur and others have changed the structure of the industry. In the farming industry, things will be getting much more challenging with CETA. Most of Canada’s 11,000 dairy farmers are concerned about the future of the quota system. Some adjustments have been made by provincial boards in recent years, but these have not been nearly sufficient. More trade-focused programs are needed and boards should think of ways to entice dairy farmers to become more competitive. A robust vision for the sector must be realized. Both governments and the dairy sector have been struggling with this problem for decades.

Supply management is about producing what Canada needs as a nation. The quota system allows producers to feel confident and get paid well, while high tariffs on imports keep foreign products away from Canadian consumers. This is a simple system, which has been heavily criticized by most of the industrialized world for decades. Now CETA will allow thousands of kilos of cheese to enter the Canadian market, exempt from tariffs. This influx of products will represent about two per cent of Canada’s milk production, which will no longer be needed. This figure may not seem like much to the average person, but CETA does in fact create a significant breach in the quota system. This change in turn will destabilize Canada’s entire agricultural system. And, with all provinces having endorsed CETA under the previous government, more changes are on the way.

CETA will force the issue of supply management reform which should be welcome news, for dairy farmers most of all. Most have been led to believe that the status quo will serve their interests well moving forward. But, given that Canada has lost well over 30,000 dairy farms under supply management, it is time for governments and industry to work on a comprehensive plan to allow the Canadian dairy industry to become more competitive. A recent benchmark report suggests that Swiss dairy farmers are the least competitive in the world. Canadians are a close second. If borders open up to allowing more foreign dairy products in the future, Canada’s dairy sector will completely collapse. Any reform would need to be implemented over the next 15 to 20 years, to give Canadian dairy farmers a fighting chance to adjust to these market changes.

CETA will be a catalytic force for change, and Ottawa must develop an appetite for this, since it will not be easy. The Canadian government will need to contend with years of fiscal and socio-political baggage. The mandate letter given to the minister of agriculture did not mention anything remotely close to reforming Canada’s archaic supply management practices. These are due for a complete overhaul, and leadership coming from Ottawa will be key. For now, the industry has been left to deal with its own problems.

As the deadline for ratification of CETA loomed, the Trudeau government’s inexperience in diplomacy and global negotiations was painfully obvious. With CETA and other such agreements, it appears the Trudeau government does not have much desire for negotiations in general. Not very reassuring for those looking to Ottawa for some leadership in reforming our supply management regime, which is in dire need of restructuring. Patience and reserve are virtues, particularly when dealing with the ever-contentious issue of agricultural trade.

With CETA, Ottawa almost fumbled the ball in the proverbial end zone at the last minute of play. But the deal did prevail. Hopefully the Trudeau government adopts a different, more mature approach domestically for the betterment of Canada’s own dairy farmers.

About the author

Contributor

Sylvain Charlebois is senior director, Agri-Food Analytics Lab, and professor in food distribution policy, Dalhousie University.

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