Last week the Harper Government announced that the highly anticipated Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union had been finalized. The ratification process could take up to two years due to the complexities involved in national and sub-national approval on both sides. However, the promise of free trade with the EU and the anticipated benefits are enough to keep Canada’s business sector waiting with bated breath. CETA is expected to open up 98 per cent of the EU’s 9,000 trade lines as duty-free, allowing the Canadian market unprecedented access to the European economy, among the world’s largest at $17 trillion, with 500 million consumers. Ultimately, it is estimated that Canada will see a $12 billion annual GDP boost, which roughly translates to 80,000 new jobs or $1,000 extra annually per household.
Despite the hype, questions remain about exactly how the deal will affect Western producers. First, the agriculture and food sector already sees Canada exporting approximately $2.4 billion annually to the EU, while importing $3.9 billion. The potential new gains moving forward through CETA could be significant. Second, the EU is the world’s largest importer and exporter of agriculture and food, evident in its substantial network of retail food suppliers on the global market, like Metro, Tesco and Carrefour for example. As a result, Europe’s international distribution stands to significantly diversify Canada’s market opportunities, while encouraging our producers to make Canadian commodities more valuable.
However, this means Canadian producers will need to adapt their exports to the EU’s non-tariff barriers, which involve much higher health standards than Canadian producers currently adhere to. The EU prides itself as one of the most forward-thinking regions in the world regarding strict trading practices dealing with cosmetic, food and agriculture ingredients and production. Most of these barriers involve restrictions on importing products containing certain ingredients such as genetically modified organisms (GMO) or growth hormones, along with a vast range of labelling requirements that must meet EU standards before entry. Many countries are working on or have already implemented similar restrictions on these types of ingredients, notably New Zealand, Australia, Japan, Switzerland, Norway, Thailand, Brazil, the Philippines, among others.
As Canada is recognized as a world leader in GMO canola production, widely uses growth hormones in hog feed and beef cattle, and only recently standardized requirements for organic labelling in 2009, we are falling behind on the market trend. The process of exporting our food and agriculture to the EU will cost more than a few shipping tankers. However, despite this daunting task, Canadian consumers have been jumping on the bandwagon regarding food health standards in recent years. There are many more ads and labels boasting paraben, GMO, or hormone free, and the organic industry continues to boom. As the EU and a growing faction of Canadian consumers continue to demand these types of regulations on food and agriculture, it is a good time for Canadian producers to usher in a new era of manufacturing with better quality goods that are less artificial, with more wholesome ingredients.
There is plenty of opportunity for increased trade and development available to Canadian companies, and if the threat of competition from well valued EU imports through CETA galvanizes these companies to up the ante and produce, sell and export their own products of equal or better value, the profit potential for Canada is significant.
Trade is a core component of Canada’s economic success, and free trade deals such as CETA only serve to enhance Canada’s economic potential and motivate Canadian companies and producers to provide world-class products at the most competitive prices to consumers. Naturally, the challenge to ratifying CETA remains the overtly protectionist policies of certain Canadian provinces and European states within the EU, but if the perceived benefits of CETA for both Canada and the EU are fully appreciated, even those typically oppositional to free trade should come on board before long.
Both Canadian and European consumers are ready to reap the benefits of CETA. Let’s hope that the ratification process keeps in mind the interests of consumers rather than outdated and punitive protectionist policies.