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Between January and March 2019, the Canadian Food Inspection Agency (CFIA) received notifications of non-compliance from the General Administration of Customs China (Customs China) regarding the detection of alleged quarantine pests in canola seed shipments from Canada.
From March to September 2019, Canada worked through all available channels (e.g. World Trade Organization (WTO), G20, bilateral engagement) to resolve this issue, including holding five teleconference calls with Chinese officials.
In April 2019, the Government of Canada established the Industry-Government Canola Working Group to help canola producers navigate through this uncertain time. The Working Group meets regularly to discuss market diversification efforts and support to the sector. With respect to market diversification, discussions have focused on increasing opportunities for canola-based biofuels both domestically and in the European Union, as well as on increasing exports to growing Asian markets.
On May 1, 2019, the GOC announced enhanced financial support to producers through the implementation of the new regulations to strengthen the Advance Payments Program (APP). The amendments increase loan limits from $400,000 to $1 million for all producers on a permanent basis and increase the interest-free portion of loans on canola advances from $100,000 to $500,000 in the 2019 program year. Producers of all other commodities can continue to receive up to $100,000 interest-free. In addition, on August 15, 2019, a stay of default was announced for crop producers impacted by the market disruptions. Eligible producers could take advantage of an additional six months to repay 2018 cash advances under APP.
On February 27, 2020, the Canola Council of Canada released a statement calling on the federal government to resolve the canola seed dispute with China and to support industry diversification efforts.
On March 30, 2020, government officials held a conference call with Customs China where China informed Canada that the 2016 Memorandum of Understanding outlining the quarantine conditions for canola seed, would not be renewed. China also stated that, as of April 1, 2020, Canadian shipments of canola seed would be required to have dockage levels of less than 1%. An official letter from China subsequently followed.
Canadian government officials have responded to China to acknowledge this letter. An additional technical letter followed to confirm process details moving forward. Government officials are working closely with industry stakeholders and provincial counterparts to facilitate predictable access to the Chinese market.
On May 20, 2020, the CFIA received four notifications of non-compliance from Customs China for Canadian canola seed that arrived in China between January and April 1, 2020. Both exporters confirmed their respective shipments cleared and product disbursed into the marketplace without incident. The CFIA will also investigate as per standard inspection procedures.
Canada's current Renewable Fuels Regulations require blending of renewable fuels into the diesel/distillate and gasoline fuel pools at a rate of 2% and 5%, respectively. These Regulations were part of actions taken under the 2006 Renewable Fuels Strategy, together with a comprehensive suite of programming, to help develop the domestic renewable fuels sector. These mandates have created a steady and stable market signal for renewable fuels, including biodiesel from canola.
In 2016, the Minister of Environment and Climate Change committed to develop a new and more ambitious Clean Fuel Standard (CFS). The CFS could potentially create a significant increase in demand for renewable fuels, including agriculturally-derived biofuels. However, the details of the design of the CFS, as well as what accompanying incentive and industry support programs may be made available, will influence the scope of the opportunities for agriculturally-derived fuels.
Canola industry stakeholders have consistently advocated for an increase in renewable content mandates for diesel from the current 2% to 5% under the CFS, in order to create a strong market signal for canola-based biodiesel. Environment and Climate Change Canada (ECCC) have consistently indicated, including in engagement with the canola sector, that this would be incompatible with the principles of their approach under the CFS. However, it is expected that current mandates of 2% and 5% will be maintained under the new Standard, at least in the short term.
Agriculture and Agri-Food Canada has been collaborating with ECCC in the development of the CFS since it was announced in 2016, and will continue to be actively engaged to ensure that an agricultural perspective is reflected.
ECCC is working towards publishing draft regulations for the liquid fuel class of the CFS, in the Canada Gazette, Part I in fall 2020, with final regulations to follow in 2021 and come into force in 2022.
As Canada is the fifth largest exporter of agricultural products and the fifth largest importer of agricultural products in the world, we must continue to keep the borders open for food and supplies movements. Despite some localized issues, the transportation system supporting food and related products has continued to function.
The Government of Canada plays a critical role to support farmers and food processors to provide safe and secure supply of food to Canadians. Numerous concrete actions have already been taken. For example, the Government has:
Federal, Provincial and Territorial Ministers continue to meet regularly to discuss the impacts being faced by the sector and what supports can be provided to Canadian producers and processors in response to the COVID-19 crisis.
Following the conclusion of negotiations, leaders signed the Canada-United States-Mexico Agreement (CUSMA) on November 30, 2018. In April, all parties notified of the completion of their domestic ratification procedures for the CUSMA. Consistent with the CUSMA text, the Agreement is to enter into force on the first day of the third month following the last notification, which is July 1, 2020.
The CUSMA preserves duty free access to North American markets for a wide range of Canadian agriculture products such as meat, grains, pulses, maple syrup, wines and spirits, and processed foods. The CUSMA includes new obligations for agricultural biotechnology that establish practical, trade-facilitative approaches to getting safe products to market. The Agreement contains provisions to minimize time gaps in authorizations and ensure that cases of low level presence (LLP) occurrences in imports are managed based on risk and in a timely and pragmatic manner. Agriculture stakeholders will have new market access in the form of tariff rate quotas into the United States for refined sugar and sugar-containing products, as well as for certain dairy products including cheese, cream, milk beverages, and butter. Canada also achieved liberalized rules of origin for margarine, and eliminated tariffs on peanut butter, whey and margarine.
As part of the negotiated outcome, Canada agreed, among other things, to provide additional market access to the United States for dairy, poultry and egg products; to ensure the elimination of current milk price classes 6 and 7 and ensure prices for milk used to make certain products use a new pricing formula (i.e., using a U.S. reference price); to impose an export charge for skim milk powder, milk protein concentrate, and infant formula if exports exceed certain thresholds; and to publish, notify and consult on various aspects of milk class pricing.
Canada also agreed to allow grain grown in the United States, which is of a variety that is registered in Canada, to receive an official Canadian grain grade. Additionally, Canada agreed to remove requirements for official inspection certificates to indicate that grain grown in the United States is of foreign or mixed origin. Previously, the Canada Grain Act excluded any type of imported grain, including from the United States, from receiving statutory Canadian grades based on origin.
Canada and the United States benefit from highly integrated supply chains with bilateral agriculture and seafood trade totaling C$66 billion in 2019, of which Canadian exports totaled C$37.3 billion. In addition, both countries work collaboratively on issues of mutual interest such as regulatory cooperation, science and technology cooperation, third country market access, and promotion of science-based international standards.
Canada and Mexico enjoy a productive bilateral agricultural trade relationship and have highly integrated markets. Canada was Mexico's fourth-largest export market for agri-food and seafood products in 2019, while Mexico was Canada's fourth-largest export market. Overall, bilateral agricultural trade between Mexico and Canada reached C$4.7 billion in 2019. Mexico enjoyed an agricultural and seafood trade surplus of C$825 million in 2019.
After July 1, CUSMA will apply to imports from the United States. The CUSMA provisions are similar to those in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the Agreement stipulates that 85% of the tariff rate quota be allocated for the importation of milk in bulk (not for retail sale) to be processed into dairy products for use as inputs in further food processing.
Other dairy beverages similar to milk are imported under different tariff codes. They are part of a group of products made with natural milk constituents. While there are tariff rate quotas to import these products under the WTO, CPTPP, and CUSMA, the volumes are quite limited.
The Comprehensive Economic and Trade Agreement (CETA) came into force on September 21, 2017, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) came into force on December 30, 2018 and, the Canada-United States-Mexico Agreement (CUSMA) was signed on November 30, 2018. The trade agreements offer significant opportunities for the Canadian agriculture and agri-food sector, while creating some challenges due to new market access for supply managed dairy, poultry, and egg products.
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