Thank you very much, Mr. Chairman.
We certainly appreciate not just the opportunity to be here but the accommodation to do it by video conference. It is important to us because the Canada-Europe comprehensive economic and trade agreement represents the most significant opportunity in a generation to create new market access for Canadian beef exports.
Annual beef consumption in the European Union is approximately 8 million tonnes, or actually a little bit more than that. Unfortunately, Canada ships very little beef to Europe due to many layers of barriers that prevent Canadian beef from realizing its full potential in that market. There are both tariff and technical barriers. All layers have to be addressed in this negotiation to produce meaningful access.
The Canadian Cattlemen’s Association strongly supports the CETA negotiations. Whether we support the final agreement is really going to depend on whether it provides meaningful access for beef. I would like to provide you with a sense of the barriers that Canadian beef faces and that need to be addressed.
I'm going to start with the tariff situation. The European Union maintains a prohibitively high tariff on beef imports. The most favoured nation duty rate, or the MFN—and that's the rate established under the WTO—is prohibitively high. It's 12.8% of the value, plus an additional amount that ranges from €2,211 to €3,041 per tonne, depending on what the cut of beef is. This really works out to be somewhere in the neighbourhood of a 140% tariff, and virtually no trade can take place at that tariff level.
In the past, whenever the European Union has relaxed or eliminated the tariff, it has done so only up to a limited quota amount, very similar to what Mr. Butler, from the seafood industry, described. They refer to that as a tariff rate quota, or a TRQ. There are currently two small TRQs that are open to Canadian beef and to other suppliers of high-quality grain-fed beef, so we share those TRQs.
One of them is for 11,500 tonnes at a 20% rate of duty, and the other is for 21,500 tonnes at 0%, or a duty-free rate. That 21,500 tonnes at 0% TRQ was recently created as compensation for what is commonly referred to as the EU hormone ban. And this TRQ is expected to rise to 48,200 tonnes by mid-2012, pending the fulfillment of some technical conditions. So at this point we don't necessarily have a guarantee that it is going to rise to that amount.
As these existing quotas are extremely small in relation to the import demand, a grey market has developed where speculator companies are able to obtain quota allocations and then resell their allocations to the actual importers. This practice has become a new de facto tariff. We calculate it at somewhere in the neighbourhood of 17% to 20% extra cost. Therefore, we are very concerned that any agreement under the CETA to create a TRQ smaller than the EU import demand is going to have this TRQ tariff effect.
The Canadian beef sector is really not interested in perpetuating this problem in the CETA, and therefore we are seeking unlimited duty-free access in the CETA.
That's the tariff side. But as Kathleen mentioned in the first panel, we also face significant non-tariff technical issues.
I did mention the so-called hormone ban. Any beef sold in the EU must come from animals raised without the use of growth promotants. This is often referred to as the hormone ban, even though it also bans other non-hormone growth promotants such as beta-agonists, which are safely approved and widely used in Canada and in the United States. Nevertheless, the Canadian beef sector can live with this EU condition as long as real, meaningful market access makes it worth our while.
The protocol for proving that Canadian cattle are in compliance with this requirement also needs to be modernized. At a minimum, we need to obtain improvements that are already utilized by United States cattle producers to raise U.S. beef for the EU market.
Some EU conditions for harvesting meat from livestock are incompatible with Canadian standards. The most significant is the EU prohibition on Canadian antimicrobial protocols, such as carcass washes. These are protocols that we use to make sure that the beef people eat is safe, and we're seeking approval of Canadian processing conditions by the European Union.
We require the recognition that the Canadian meat processing system is equivalent to the EU system in producing safe, acceptable meat even if some specific procedures may be different. There was a good discussion on the earlier panel about the difference between harmonization and equivalence. We feel that the EU should approve the Canadian federal system and all facilities operating under the federal system should be authorized to export to the EU.
In closing, it is clear that we have significant challenges in this negotiation, but we feel the rewards are worth the effort and the objectives we have outlined are achievable.
Before I take your questions, I would support Mr. Butler's dining suggestion earlier, that you have a little seafood, but I would also suggest it would be a little more enjoyable if you had it on the side of a nice piece of beef.
