Red meat issues snag final Canada-EU trade talks

From the outset of the Canada-Europe trade talks, officials and observers cautioned that contentious agriculture issues would be saved for the end of the negotiations.

But while Canadas supply-managed dairy industry figured prominently in early speculation about things that could hold back a deal, that preliminary handicapping was betting on the wrong kind of cattle.

The final beefs around Canadas negotiating table this week are about red meat.

A portion of what Europe may have hoped to gain from Canadian dairy farmers on cheese tariffs and labelling still appears likely. But in general, Canadas marketing boards appear spared from the butchers block.

Why?

Compared to other markets targeted in Canadas trade agenda, protection-driven Europeans find common ground with the intent of Canadas supply management system. Expecting Canada to concede on this without a massive gain in return amounts to the pot calling the kettle black.

The bigger and more probable agriculture deal is all about saving Canadas more open and with that, volatilered meat industry. Restoring its health and stability requires export growth.

Driven by that, Canadian negotiators showed up hungry for more access to European markets.

Canada exported around 337,000 tons of beefaround the world in 2011, down about17 per cent from 2010.

The European Union's ambassador to Canada, Matthias Brinkmann,said last monththat European negotiators offered to allow the minimum quantity Canadian beef producers say would be required to justify separate streams of hormone and antibiotics-free cattle to comply with EU regulations: 40,000 tons a year.

But that wasn'tenough for Canada, he said.

"We are ready to deliver that and even go beyond that, but there's a certain limit which we can't go above," he said.

Reviving ailing beef exports

Twenty-five years ago, Europe was Canadas second-biggest beef customer. But as Europes common market took hold in the 1980s, changes in the EUs meat processing regulations and a ban on the use of hormone products common in North America slowed beef trade to a trickle.

Canadian pork, too, suffers from similar barriers: not only a closed market, but dissimilar food safety rules.

Only a handful of Canadian slaughter facilities are certified for export to the EU lacking incentives to certify to European standards until the market opens up.

But just because regulations differ, Canadians argue, doesnt mean that meat on this side of the Atlantic is any less safe for consumers.

For the moment, more than three-quarters of Canadian beef moves south. But the U.S. beef trading relationship has been testy, with everythingfrom ongoing labelling spats to outright border closures during the BSE crisis.

Finding new markets has been both a political and an economic priority for the Harper government.

Off to Asia on a trade mission? Look for Agriculture Minister Gerry Ritz to be there, seeking a heartier slice of emerging meat-eating markets.

Even the smallest agreements on beef exports are celebrated with congratulatory releases and ministerial photo opportunities including last weeks modest potential gains from a deal with Chile.

The benefits of the new deal were estimated at a meagre $5-10 million annually, for a beefindustry with total exports worth over $1.3 billion in 2011. While that playing field now may be level, it's still very competitive: Chile hasbeef fromBrazil or Argentina right on its doorstep.

Cutting into Europe remains the highest-value item on Canadas trade menu.

"In the past, Stephen Harper, Gerry Ritz and Ed Fast have done a terrific job of raising the market access issue," says Dennis Laycraft, the executive vice-president of the Canadian Cattlemens Association.

Its a priority for provincial governments too especially the four western provinces, which identified beef market access as a priority for the Canada-EU talks.

CBC reported last week that the federal government has been contacting provinces to discuss the final aspects of the deal and confirm their approval, thought to be a final step before concluding the talks.

If no major gains are made on beef, the deal risks losing domestic support.

"Provinces are being asked to make concessions," Laycraft says. "It makes it difficult for them."

"If we dont get an adequate deal on beef, both federal and provincial governments have said no deal," he observes. "Were hoping that Europe is getting the message that this is not a small issue for Canada."

France, Ireland pushing back

Europeans are "very good meat eaters," Laycraft says. They also drive a hard bargain at the negotiating table.

His organizations priority is going after premium customers, not dumping large amounts of cheap beef and threatening European prices.

But some countries are resisting Canadas re-entry.

France and Ireland currently supply the bulk of Europes beef, dating back to the collapse of the U.K. industry after its mad cow crisis. Farmers wield a lot of political clout in both countries, and Brinkmann told reporters that what Canada was asking for would be "suicidal" for farmers in these countries.

Political leaders in both placescould receive visits fromHarper starting next week, with high-level political arm-twisting expected in the final days before an agreement in principlecould beannounced, perhaps before the G8 meetings in Northern Ireland June 17-18.

In the meantime, Canadas beef industry has been in dialogue with European farmers to ease fears and explain that Canada expects a slow process with gradual, incremental gains.

"Were out to increase [overall demand for beef in Europe] and develop niches," Laycraft says.

"We wont be undermining someones price," he says. "Thats not a strategy [the Canadian beef industry] can sustain."

Canada wants to market fresh, nicely-aged beef cuts in particular. Whats exciting about the European Union, he says, is the potential to target a variety of tastes in different countries.

Marketing to Europe is about "finding your place," he says, with some countries wanting leaner beef than others.

Ready to announce?

"Theres still a little work to do" on labelling and safety regulations, Laycraft says, but theres a process in place nowto keep working towards more common ground on regulations.

"The critical issues are volumes," he says, suggesting that negotiators are now working within an established range and the difference between the two sides shouldnt prevent an agreementand maybe, an agreementsoon.

Canadas chief federal negotiator, Steve Verheul, provincial government representatives and industry observers are hunkered down for another long week at and around the table in Brussels.

The anticipated start this month of free trade talks between Europe and the U.S. should focus minds. The North American beef industry is heavily-integrated across the Canada-U.S. border, with some products crossing multiple times between birth and butchering.

To gain a real advantage, Canada may need to move now, before the European market opens to American beef as well. The work on reconciling food safety standards inCanada's talks may serve as a template for theAmerican round.

Will the traditional moules-frites on offer in Europes capital ever be replaced with Canadian AAA steak-frites?

Like a well-aged cut, satisfying results are taking time, as one deadline after another has passed.

Laycraft, whos been to Brussels five times during the process, says hes "more optimistic than confident."

"It feels like theyre trying to get to the end here. Fingers crossed."