Canada-EU trade deal's July 1 target threatened by new cheese dispute

Plans to bring most of Canada's new trade deal with the European Union into effect by July 1 may be unravelling due to a new dispute over who gets to import EU cheese.

Europeans upset at how Canada will allocate import quota for new EU products

Canadian cheeses will soon face new European competition as Canada's trade deal with the EU takes hold. CBC News has learned its implementation may be delayed over a dispute about who gets to import and profit from the new EU cheeses. (Graham Hughes/Canadian Press)

Plans to bring most of Canada's new trade deal with the European Union into effect by July 1 may be unravelling due to a new dispute over who gets to import EU cheese.

Under the terms of the Comprehensive Economic and Trade Agreement (CETA), Canada has agreed to allow nearly 18,000 additional tonnes of European cheese to be imported tariff free.

But CBC News has learned that when Canadian officials briefed their European counterparts on how they would allocate the quota for importing this new cheese, not everyone around Europe's cabinet table felt Canada's approach lived up to the spirit of the negotiations. 

A European official, speaking on the condition of anonymity because he was not authorized to speak, characterized the state of things as a "row."

Canadians haven't been transparent enough about several aspects of CETA's implementation, the source said, and presented the cheese quota decision as a non-negotiable fait accompli. It was a final straw for upset Europeans who had been otherwise eager to get on with the deal.

The source said Canada informed the EU that 60 per cent of the new import quota would go to domestic dairy producers and processors. Europeans fear they won't use it, so fewer new cheeses compete with their domestic products.

If the quota's unused, or there's any incentive to delay imports, Europe could be effectively denied the market access it fought for years to get. CETA provides a way for complaints like this to be resolved, but Europeans would prefer not to have to sue Canada after the fact, the source said.

A spokesperson for the EU delegation in Ottawa would not comment on rumours about why the July 1 date hasn't yet been confirmed.

But a Canadian dairy industry source, also not authorized to be named, cited European pushback as the reason CETA's implementation may be delayed. Domestic sources say their sector has not been told how much quota is coming their way.

Trudeau on new Canada EU cheese dispute

6 years ago
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Trudeau on new Canada EU cheese dispute

"We're always going to make sure that we're protecting Canada's interests in standing up for economic benefits for our citizens and for our small businesses," Prime Minister Justin Trudeau told reporters on his way to the Liberal caucus meeting Wednesday morning.

Quota announcement delayed

Stakeholders have been waiting for months for International Trade Minister François-Philippe Champagne to reveal how new cheese imports would be managed, and more significantly, who could profit. No explanation has been offered for what's taking so long.

Consultations were held last year. Retailers argued they would offer consumers the most choice and the lowest pricing, through their efficient distribution channels.

But producer groups and dairy processors argued that if they were given a stake, they could balance out any losses from new competition with potential profits from the imports. The dairy industry would bring in different  and unique cheeses, they argued, and benefit from new relationships with European cheesemakers.

It's unclear which EU cheeses may be imported under CETA. If retailers are deciding on what to import, they may focus on what's most profitable for them. If dairy producers or processors are picking cheeses, they may opt for varieties they don't produce themselves. (Marco Bertorello/AFP/Getty Images)

The Quebec government weighed in on the side of the industry.

More recently, hints emerged from federal officials that the dairy sector's arguments may win the day. 

In an interview with a French-language agriculture publication last month, Agriculture Minister Lawrence MacAulay said he believed producers would be happy with Champagne's announcement.

Interprovincial trade deal matched date

The European Parliament ratified CETA in February. Canada's cabinet has also ratified the agreement, and the bill to implement it by changing the necessary federal laws and regulations received royal assent last month. 

Both sides agreed to exchange diplomatic notes to signal their readiness for CETA to take hold and set a date. 

Canada's provinces and territories needed to signal they're ready to comply as well. The final province to do so, Quebec, voted to approve and implement the trade deal on Wednesday.

More details on how promised dairy compensation programs will work are expected soon after Champagne's cheese quota announcement.

It's the final hurdle before most of CETA can take effect provisionally. For jurisdictional reasons, a few parts of the deal must wait until individual EU members' legislatures also ratify the deal. So far, only Latvia and Denmark have done so.

Neither Canada nor the EU carved July 1 in stone. But provinces and territories set their new interprovincial free trade deal to start on the same date. Some of its measures are directly tied to what they agreed to under CETA.

'We're very confident'

Both Canadian and EU sources suggest things may suddenly be resolved at the last minute. It's happened before when something has threatened the deal. Diplomatic notes can be drafted on short notice.

The European objections are not believed to be widespread. It's a specific constituency that needs persuading.

Quebec officials including Premier Philippe Couillard, second from right, joined Prime Minister Justin Trudeau, third from right, and his delegation for CETA's signing last October in Brussels. While Quebec has been enthusiastic about CETA overall, its dairy industry has serious concerns. (Francois Lenoir/Reuters)

The Canadian government is trying to provide assurances that the full quota will be used and Canada is living up to the spirit of the deal.

Champagne last spoke to his EU trade counterpart, Cecilia Malmstrom, last week at OECD meetings in Paris. 

"The final few days before provisional application involve a number of conversations and discussions to make sure that both sides understand the regulations that are being put into place," Champagne's spokesperson, Joseph Pickerill, told CBC News. "That process is very much underway.

"We are very much in the final stages," he said. "But we're very confident that this deal is going to be brought into effect very soon."

When CETA was negotiated, the new market access for European cheeses was one of the final, and most contentious, things Canada agreed to in the wide-ranging agreement, which cuts tariffs, harmonizes rules and otherwise liberalizes trade for billions of dollars worth of goods and services.

Until this gets sorted out, it appears everything else must, again, wait. 

"It always comes back to cheese, doesn't it?" quipped former Conservative cabinet minister Tony Clement on Wednesday. "I think a deal is a deal and let's implement it."