Ricardo Migueláñez. @rmiguelanez
On February 15, European Parliament approved the Comprehensive Economic and Trade Agreement (CETA) between the European Union and Canada, after seven years of negotiations. This will begin a new chapter of trade relations between both parties in which the Spanish agri-food sector should play an important role.
CETA was originally signed on October 30th, 2016, and following ratification by European Parliament with 480 votes in favor, 254 against and 33 abstentions, it will become partially and provisionally effective in the coming weeks, although trade aspects will be almost fully effective pending the definitive ratification by 38 national and regional parliaments in EU member states, the results of which are still uncertain.
Given the implications for the liberalization of trade between the European Union and Canada, CETA is important because Brussels is using it as a model for future bilateral agreements it will have to negotiate, including in the case of the United Kingdom, if it does eventually leave the EU. It will gradually enter into force with a view to reducing import quotas and duties to zero, it includes a series of agri-food products that are "sensitive" to trade between both parties, and it includes a list—which may be expanded in the future—of 143 European Geographical Indications, recognizing the European system to protect quality foods and beverages based on origin.
Canada is currently an intermediary commercial destination for Spanish agri-food exports, logically a long way away from its neighbors and other non-EU countries, like the US (agri-food export quota of 14.9% in 2015), China (9.5%), Japan (6.2%) and Switzerland (4.9%). Among non-EU countries, it ranked 13th in 2015. As a result, it has notable growth potential in the coming years, if the advantages of CETA are leveraged properly to increase the diversity of foods and beverages in Canada.
Although Spain's agri-food trade with Canada has traditionally been negative, since it imported more than it exported in 2015 (the last full year analyzed), our exports expanded by 13% in terms of value vs. 2014, while imports from Canada slipped by 22%, yielding a positive trade balance of 38.85 billion euros.
It's worth noting that, in 2015, Spanish agri-food exports to Canada accounted for barely 0.6% of the total, and 0.6% of imports as well, while exports by Spain to non-EU countries accounted for 2.2% and agri-food products imported by Spain from outside the EU accounted for 1.3%.
It's clear that Canada, as a destination for leading Spanish agri-food products, has a small market share, though wine exports are leading the way. In 2015, wine represented more than one-third (33.9%) of all Spanish agri-food sales to Canada, but overall Canada represented just 3% of the value of all Spanish wine exports that year.
In 2016, Canada ranked 14th in terms of Spanish wine imports by volume, with 30.4 million liters (-12.5% year-on-year), with a market share of barely 1.1% of the total. It performed better in terms of value, ranking 9th, with revenues of over 87 million euros (+1.9% compared with 2015), accounting for 3% of the total value exported. It's also worth highlighting that the average sales price of Spanish wines in Canada—where competition with wines from France (in the French-speaking areas), Italy, the US, Chile, and Australia is very strong—was one of the highest last year. It ranked fourth, at 2.86 euros/liter, lagging only Switzerland, the US and Norway.
In Canada, 5.1% of the wine it imports comes from Spain, which is the fifth-largest supplier. Exports have advanced in recent years. Bulk wine was more predominant than bottled wine in 2010; however, in 2013, bottled wine surpassed bulk wine, which has declined. The breakdown in 2016 was 55% bottled wine, 38% bulk wine.
In 2016, of the 30.41 million liters of Spanish wine imported by Canada, almost 14.7 million had PDO status, worth 64.6 million euros in value and with an average price of €4.41/liter; another 9.11 million were bulk wines with no PDO, worth almost 4 million euros and with an average price of €0.42/liter; almost 1.97 million came from sparkling wines, with revenues of 8.82 million euros and an average price of €4.48/liter; around 1.56 million were packaged PDO wines, worth 4.22 million euros, at €2.71/liter, and almost 2.75 million were other wines, worth 5.36 million euros at €1.95/liter on average, according to the most recent data analyzed by the Spanish Wine Market Observatory (OEMV).
Canada accounted for 2.3% of Spanish canned fruit and vegetable exports in 2015, valued at 20.6 million euros. It was the third-most exported product, following citrus fruits, which barely accounted for 1.2% of total exports, totaling 38.05 million euros. Additionally, Canada absorbed 0.5% of Spain's fresh vegetable exports, valued at 8.95 million euros, and 0.5% of pork exports, valued at 7.86 million euros.
According to the Ministry of Agriculture, and in view of CETA, bottled wine may be the product that reaps the most rewards since it won't be bound by trade barriers and it will be recognized with Geographical Indication quality logos.
From among all the countries that export agri-food products to Canada, Spain ranked 16th in 2015, with barely 1.3% of the total. The US led the way, with a market share of 12.4%, followed by Mexico, with 10.9%, in both cases thanks to NAFTA. China accounted for 7.3%, Italy for 6.5% and Brazil for 5.8%.
The strongest-performing Spanish product in Canada was citrus fruit, as 7.8% of Canadian imports of this product came from Spain. The percentages were similar for canned vegetables and Spanish wine between 2013 and 2015, as Canada didn't have a very high dependence on those products. Vegetables accounted for 6.7% and wine for 5.1% of the total in 2015.
Exports of Spanish pork to Canada increased in the last two years, for a total share of 2%, while fresh Spanish vegetables accounted for just 1.3% of the total imported—low numbers in both cases, but with an upward trend.
By the same token, Spanish imports of Canadian agri-food products are also quite moderate. Following growth of 95.3% year-on-year in 2015, wheat became the top product imported by Canada, accounting for 18% of the total, for a value of 43.37 million euros. Even so, Canada only accounted for 4% of Spanish wheat exports that year.
However, Spain is more dependent on Canada when it comes to semichemical wood pulp, as the North American country accounted for 77% of imports, worth 13.27 million euros in 2015. Spain is also slightly dependent on dried legumes from Canada, as 25% of total imports came from there in 2015, valued at 38.28 million euros. Soy beans accounted for 1.8% (22.81 million euros), and shellfish for 1.5% (16.43 million euros).
Of the five most-imported Canadian products by Spain, it's clear that Canada does not depend on Spain by any means, and the share of Spanish products has even declined in recent years. Soy beans had the highest share in 2014, when 3.6% of Canadian exports of that product headed to Spain.
As for exports of semichemical wood pulp, Spain represents just 1.6% of total Canadian exports, while wheat accounts for half of that, about 0.8%, i.e. Canadian exports of this grain (durum wheat in particular, and some common wheat) to Spain accounted for just 0.8% of the total.
EU-Canada agri-food trade
The European Union is a net exporter of agri-food products to Canada, with a surplus of around 1.250 billion euros in 2016. EU exports of these products fetched 3.438 billion euros last year, up 0.6% compared with 2015, while imports of Canadian products amounted to 2.192 billion euros, down 2% year-on-year.
European sales to Canada have been on the rise in the last few years, while imports of Canadian agri-food products, which peaked in 2011, have started to slide.
The structure of EU exports is considerably different from the structure of EU imports from Canada. The EU primarily exports products with added value, such as prepared foods and beverages, especially wine (24% of the total, 837 million euros), spirits (9%, 316 million euros) and beer (6%, 209 million euros), as well as pastries and cookies (8%, 260 million euros and 5%, 187 million euros, respectively). The EU receives raw materials and first degree processed products, such as grains and oleaginous plants, as well as certain fresh, frozen and dried vegetables from Canada.
CETA includes a series of sensitive products for both the EU and Canada. For the EU, import quotas in favor of Canada for those products are as follows: beef, which would increase from 7,640 to 45,850 tonnes in carcass weight equivalent in 10 years, as well as 3,000 tonnes of bison and the existing 4,162 tonnes already granted to Canada as compensation for the hormones dispute. In the EU, only hormone-free meat may be imported.
As for ractopamine-free pork, the total duty-free access the EU will grant to Canada will increase from 12,500 to 75,000 tonnes over ten years, plus the existing WTO TRQ (tariff rate quota) of 4,625 tonnes already in place. As for low- and medium-quality wheat, the current EU WTO-TRQ will be increased from 38,853 tonnes to 100,000 tonnes in seven years, and sweet corn, from 1,300 to 8,000 tonnes in ten years.
Canada will open for the EU a new bilateral quota to sensitive products which includes cheese, amounting to 17,700 tonnes (16,000 tonnes of high quality cheese and 1,700 tonnes of industrial cheese). Moreover, 800 tonnes of high quality cheese will be added through a technical adjustment to the EU portion of an existing WTO TRQ.
No mutual concessions are expected for poultry and eggs.
COPA-Cogeca, which includes agricultural organizations and cooperatives in the EU, is pleased by the positive vote by European Parliament, as it believes that the CETA will offer new opportunities to the agri-food sector for both parties, provided that trade, and in particular import tariff quotas, are managed effectively to avoid market disruptions.
These organizations view as positive the improved access to EU dairy products and wine by Canada, and they will be particularly watchful of the EU’s increased access to Canadian beef and pork.