On February 15, the European Parliament ratified the Canada-European Union Comprehensive Economic and Trade Agreement (CETA). CETA is a landmark trade deal between Canada and the European Union’s 28 member states and this agreement will drastically reduce tariffs between 35 million Canadians and 500 million Europeans. Yet this bi-lateral trade deal still has one hurdle left to be closer to implementation: Bill C-30 remains to be ratified by the Senate.
According to a 2016 report from RBC Economics, this trade deal represents a potential $12 billion annual increase to Canada’s economic activity —roughly a 0.7 percent rise in Canadian GDP each year. According to RBC, oil & gas and the mining sectors made up 41 percent of Canadian exports to the EU in 2015 alone. Since these raw materials aren’t currently subject to any tariffs, CETA will have a minimal impact.
The big winner in this bilateral trade agreement is the agricultural sector, which will see an almost complete elimination of tariffs (99 percent) as the agreement rolls out over the next seven years.
Chris Dekker, CEO of the Saskatchewan Trade and Export Partnership (STEP), says that trade agreements are “just agreements until business participates. It’s business-to-business that creates the sales.” Dekker says STEP is working to ensure that Saskatchewan businesses, specifically his 400 members, can take full advantage of CETA.
Dekker sees the European Union agreement as well-timed, given the protectionist sentiments expressed by the United States, our largest trading partner. He believes that unfettered access to the European market is crucial for the growth of Saskatchewan businesses. “The EU is a significant market,” says Dekker. “There are $8 trillion dollars in economic activity. For Saskatchewan, it’s our fourth largest market.”
According to Dekker, Saskatchewan exports $1.28 billion worth of goods into the European Union market. “The vast majority of those exports are agriculture and agrifood. We need to make sure that market has access to all of our products.”
Dekker says that Saskatchewan is one of the most trade-dependent provinces in one of the most trade-dependent countries in the world. “We calculate that one in three jobs in Saskatchewan depends on trade.”
The Saskatchewan organics industry welcomes increased trade with the EU, which is especially receptive to organically grown food. “Any trade agreement that reduces tariffs and puts more money in farmer’s pockets is a good thing,” says Marla Carlson, executive director of SaskOrganics, a farmer-led, non-profit organization.
“For organic growers, the bonus is that we already have an equivalency agreement with the EU. If you’re certified to the organic regime in Canada, that’s considered equivalent to Europe’s standards,” says Carlson.
When Bill C-30 is ratified by the Senate and CETA is kickstarted, it’ll be straight to market for certified organic producers who want to profit and grow their businesses. Angela Schmitt of Red Willow Organics was packing her bags for a massive mid-February trade show, BioFach, in Nuremberg, Germany when Industry West caught up with the producer.
“My goal is to sell 50 percent of our products to the European market,” says Schmitt who operates a family farm with her husband, Larry, near Carrot River in northeastern Saskatchewan. CETA presents a huge opportunity for Red Willow Organics, which produces grains, clovers, oilseeds and raises cattle. When CETA is in-place, there won’t be any tariffs when Schmitt sells her organic products to European buyers.
“It’s a huge incentive to do business,” says Schmitt. “And we also benefit from a well-established supply chain. Add to that the support of STEP’s market intelligence and you have a great opportunity for organic growers.”
Schmitt’s says that organic growers are perfectly positioned to ramp up their trade with Europe. “The European consumer is much more sophisticated than a North American consumer. They’re very particular about what is in their food and where it is grown.”
Because demand for organic products outstrips availability, Schmitt will hold firm to her prices when she shows off her wares at BioFach. “It’s an easy sell for both buyers and traders,” says Schmitt who is also an active board member with SaskOrganics and STEP.
Professor Eric Micheels, an associate professor in the Department of Agricultural and Resource Economics at the University of Saskatchewan, says CETA is just about opening access. “We still have to convince a customer in Europe to buy the products.”
Micheels sees tremendous opportunity for the livestock sector with the CETA deal. “But there may need to be some production changes to access that market,” he says. “Depending on price premiums, there might be a greater willingness to modify production practices to meet those market requirements.”
CETA provides opportunity but each farm will make their own decisions, says Micheels. “If it makes sense for them, they’ll change their production practices; otherwise there’s a sizeable market in South Korea and in the domestic and American markets for conventional beef producers.”
The dairy, wine and automotive sectors have more to be concerned about under CETA since these value-added industries will encounter increased competition from European businesses with more access to the Canadian consumer. “Competition is going to make the dairy sector better,” says Micheels. “The good cheese makers will rise to the challenge and everyone will benefit from better cheese.”