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HALIFAX, N.S./Troy Media/ â€“Â Canada’sÂ cheese processing sector faces some dramatic changes.
Weâ€™ll soon find out who gets to import tasty, inexpensive European cheese under the newly-ratified Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union.
Thereâ€™sÂ some debateÂ about how farmers and cheesemakers should be compensated underÂ CETA. But what should matter most is to whom Ottawa will grant permission to import tariff-free European cheese. As the July 1 implementation looms, a decision on import quotas is expected soon following months of highly-politicized consultations.
Canada has agreed to import 18,500 tonnes of European cheeses annually by year six of CETA. ThatÂ represents two to three per centÂ of our domestic market. It may not seem like muchÂ but given our highly-protectionist supply management,Â in whichÂ CanadaÂ produces all of its own milk, CETA creates a significant breach.
Since the trade deal was first signed in 2014 by the former Conservative government, the quota-based dairy sector has been anxious. Ottawa still hasÂ offered no clear plans to make the Canadian cheese sector more competitive in response to high-quality European cheese imports.
Last fall, Ottawa announced two programs to make our dairy sector more CETA-ready: $250Â millionÂ to make farms more competitive and $100Â million to improveÂ processing facilities. The most recent federal budget didnâ€™t add anything.
When it signed the trade deal, the former Conservative government promised billions in compensation, raising expectations. So last fallâ€™s fundingÂ was a disappointment for the sector, whichÂ needs muchÂ more.
According to some reports, the cost of milk production in Canada is almost double what it is in the United States. And, subsidies aside, many European dairy farms are more competitive than our farms.
Beyond the meagre financial supports, a clear road map to make our dairy sector more competitive is urgently needed. Such a plan should include a simple change in the Canadian Dairy Commissionâ€™s pricing formula to compensate farmers. Rewarding high performers should be key.Â Stragglers should be encouraged to exit the industry. Even the Dairy Farmers of Canada admit farms are falling behind.
With CETA, we can no longer afford to have farms viewÂ supply management as agricultural welfare.
We shouldÂ consider internal quotas for external markets. This plan was once rejected by the World Trade Organization, but Canada could have a much stronger argument now to grant quotas to highly entrepreneurial, innovative farmers wanting to develop new markets aboard. It’s Â worth taking such a bold move to make Canada a world-class agri-food player.
However, the federal government’s best tools to offset CETAâ€™s negative impact are import quotas, which we shouldÂ expect soon. UnderÂ the deal, Canada willÂ allocate annual cheese import licensing quotas. But who amongÂ grocers, processors, artisan cheesemakers, dairy farmers andÂ restaurants will get licenses to import?
We know that at least 30Â per cent of the quotas will be available to new entrants every year. The rest is up for grabs. Canadian importers must apply every year. Applicants need to reside inÂ Canada and be active in the Canadian cheese sector. TheÂ eligibility is very broad.
Many of the licences should go to those most affected by CETA. Priority should be given to small dairy processors, mostly family-own fine cheesemakers. Farmer-owned co-operatives should also be considered, given their links to production.
If this isnâ€™tÂ done right, theÂ dairy processing sector could suffer, since CETA makes itÂ very vulnerable. Many great Canadian artisan cheesemakers could disappear.
Consumers shouldnâ€™t expect price breaks, however. Cheese has always beenÂ expensive in Canada, yet consumers continued to buy it. Retailers could decide to sellÂ more products atÂ lower prices but thatâ€™sÂ highly unlikely.
What will change, however, is the variety of products. European cheeses will set new flavourÂ benchmarks for consumers. As a result, Canadian cheesemakers will faceÂ a different, more demanding consumer.
AndÂ if import quotas fail to support Canadaâ€™sÂ dairy processing sector properly, cheese prices could actually go up.
Any way you cut it, Canada’s cheese sector is in for some dramatic changes.
Sylvain Charlebois is dean of the Faculty of Management and a professor in the Faculty of Agriculture at Dalhousie University, Senior Fellow with the Atlantic Institute for Market Studies and author ofÂ Food Safety, Risk Intelligence and Benchmarking, published byÂ Wiley-Blackwell (2017).Â
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