The Comprehensive Economic and Trade Agreement (CETA) comes into effect in 2015, reducing trade barriers between Canada and the European Union (EU) and establishing new market opportunities for Canadian industry. CETA affords Canadian exporters unfettered access to European markets (wherein annual imports average $2.3 trillion), generating an estimated $12 billion in annual revenue and creating 80,000 new jobs.
Particularly situated to capitalize–provided the province adopts policies that reflect the region’s comparative advantages–is Newfoundland and Labrador (NL). CETA’s critics, however, argue that the agreement undermines NL’s economic stability by forcing the province to forego minimum processing requirements (MPR) in its fish and seafood industry that insulate domestic processors from foreign competition.
Provincial regulations mandate that fish and seafood caught in NL must be processed in-province before export. NL’s Fish Inspection Act schedules MPRs for over thirty-eight species, spanning from, ‘salted and packed in a carton not to exceed 100kg’ for capelin and mackerel to ‘head on gutted with stomach tube attached and in frozen form’ for monkfish.
Premier Kathy Dunderdale, however, confirmed that the province would relinquish its ability to legislate MPRs in exchange for tariff-free access to European markets (although MPRs will still apply to exports destined for non-European markets). In addition, Dunderdale announced plans to establish a $400 million fishery fund–70% federally subsidized–intended to offset CETA’s economic impact.
Despite claims that MPRs are the cornerstone of NL’s fishing industry, the province’s departure from protectionism is a major step forward.
NL originally adopted MPRs in response to its declining fishing industry. Amidst rising unemployment–an effect of the 1992 cod moratorium–the government enacted protectionist legislation that shielded domestic industry from foreign competition. These regulations, however, are inefficient and unnecessary–especially considering CETA’s economic potential.
Earle McCurdy, president of the Fish, Food, and Allied Workers Union (FFAW), argues that, “[Canada has] been operating in Europe with one hand tied behind our back for a long time. Compared to our principal competitors, we have unfair market barriers they don’t have, both in terms of tariffs and end-user requirements that are costing us value and jobs in the province.”
EU-imposed tariffs on marine imports currently average 8%–25%, presenting a significant economic barrier for Canadian exporters. CETA’s ratification in 2015, however, affords NL’s fishing industry unrestricted access to the largest fish and seafood market in the global economy.
Under the terms of the agreement, all EU fish and seafood tariff lines will be duty-free by 2022. Furthermore, CETA forces the EU to eliminate end-user restrictions on Canadian imports (an ironically similar concession to NL’s MPR surrender). These restrictions prevent Canadian exporters (including sole-proprietor fishermen) from branding, marketing, and selling their products directly to European consumers by requiring European companies to first process marine imports before final sale.
Furthermore, Canadian industry has lower energy, labour, and production costs compared to its EU counterparts–despite a warning from NL Fisheries Critic Jim Bennett that CETA benefits Spanish and Portuguese processors–further emphasizing Canada’s comparative advantage against Europe and the opportunities provided by competitive economic arrangements.
The conditions of CETA are, therefore, hugely beneficial for Atlantic Canada. NL’s fishing industry has been struggling to revive itself since 1992 and accessing European markets is the perfect incentive. Relinquishing the MPR (as well as EU-imposed end-user restrictions) facilitates diversity in the province’s fishing industry by allowing fishermen to market their product directly to European consumers, encouraging processors to economize by operating doubly as storage facilities, and permitting NL exporters to manufacture and brand their products before final sale in Europe.
Shaun Fantauzzo is a policy analyst and the AIMS on Campus project coordinator at the Atlantic Institute for Market Studies