The Canada-European Union Comprehensive Economic Trade Agreement (CETA) is making waves in Canada, and for good reason: it casts the net of Canada's global trading relationships wider than ever before – and Atlantic Canadian fisheries are well-positioned to reap the benefits of the catch. Atlantic Canada's fish and seafood industry is a significant contributor to the regional and national economy, and a strong player in key growth areas. CETA increases Canadian access to the world's largest importer of fish and seafood products, into which Canadian fish and seafood exporters have barely waded. But CETA's upside opportunities also carry some downside risks.

CETA isn't yet fully implemented in Canada, though the federal government's latest report targets July 2017. Until then, Canadians will have to wait to see whether CETA will turn the tide for Atlantic Canadian fisheries.     

THE ATLANTIC CANADIAN FISHERY

Atlantic Canada's fish and seafood industry is a significant contributor to the region's – and the country's – economy. 

Fish & Seafood Production. About 75% of Canadian fish and seafood production is exported. In 2015, Canada was the world's eighth largest fish and seafood exporter with exports valued at $6 billion; in 2016, Atlantic Canada's fish and seafood exports were valued at $4.7 billion – a healthy chunk of the overall Canadian fish and seafood export market.

Aquaculture. Atlantic Canada has particular strength in a key area of fish and seafood growth: aquaculture. The United Nations Food and Agriculture Organization reports that aquaculture's share of global seafood consumption has grown from 3% in 1950 to over 50% in 2010; at this consumption rate, a deficit of 50 to 80 million tonnes of food fish by 2030 is projected. With catch volumes expected to remain stable, aquaculture production will fill this deficit. Canadian aquaculture production has grown over 400% since 1989; in 2014, Canada's aquaculture production was valued at $733 million and about 50% of Canadian aquaculture production originates in Atlantic Canada.

Fish Oil. The market for fish oil or mineral supplement from finfish or shellfish – species that together comprise about 98% of Atlantic Canada's aquaculture production – is also growing: U.S. fish oil supplement sales grew from $35 million in 1995 to over $1 billion in 2010.

CETA

CETA has been making waves in Canada, and for good reason: it's Canada's largest trade initiative since NAFTA (probably the most well-known Canadian free trade agreement). And while the U.S. is Canada's (and Atlantic Canada's) top fish and seafood export market (about 65% of seafood trade), the EU is the world's second-largest market – and the world's largest importer of fish and seafood products. The EU accounts for about 27% of global fish and seafood imports, and it's Canada's third largest fish and seafood export market, at about 10% of Canada's seafood trade.

Free Trade Agreement. CETA is a bi-lateral free trade agreement. Governments often erect artificial trade barriers using tariffs and subsidies to restrict the flow of goods and services between its country and others, ultimately protecting  their domestic market. A free trade agreement is, essentially, a contract between two or more countries to remove some or all of those barriers with the objective of promoting the freer flow of goods and services between the member countries. Canada is currently a party to numerous free trade agreements with countries all over the world, benefitting many Canadian businesses seeking to expand their businesses markets globally market. 

Timing. CETA has been a long time coming: negotiations began in 2009 and concluded only in 2016. In February 2017, Canada's Parliament passed the law adopting CETA in Canada, Bill C-30, but it will only take effect on the date the Canadian federal government proclaims; the federal government's latest report is that it will substantially implement CETA by July, 2017.

Scope. CETA aims to cover all aspects of trade between Canada and the EU – including elimination of tariffs for fish and seafood products shipped and sold between Canada and the EU.

CETA & THE ATLANTIC CANADIAN FISHERY

The federal government is touting Atlantic Canadian Fisheries as a clear winner in the CETA sweepstakes; but with the upside opportunities for fisheries, there's also a downside risk.

Upside Opportunity. In theory, CETA will give Atlantic Canadian fish producers the opportunity to sell their products to EU markets at more competitive prices. Current EU tariffs for fish and seafood average 11%, but can be as high as 25%. When CETA takes effect, almost 96% of those fish and seafood tariffs will immediately be eliminated, and 100% will be completely eliminated seven years later:

Product

Existing EU Tariff

Tariff Elimination Period

Salmon

Up to 15%

Immediate

Scallops, frozen, live, fresh or chilled

8%

Immediate

Shrimp, frozen

12%

Immediate

Shrimp, prepared or preserved in packages less than 2 kg

20%

Immediate

Crab, fresh/frozen

7.5%

Immediate/3 years

Lobster, live

8%

Immediate

Lobster, frozen

6-16%

3 years

Lobster, processed

20%

5 years

Cod, frozen fillets

7.5%

7 years (duty-free access under tariff rate quota during elimination period)

Shrimp, prepared or preserved in airtight packages or in packages over 2 kg

20%

7 years (duty-free access under tariff rate quotas during elimination)

The tariff reductions affect some of the most exported fish and seafood species: in 2014, Atlantic Canada's top fish and seafood species in terms of export value included lobster, snow crab, shrimp and scallops, and about 65% of Atlantic Canada's aquaculture production volume consisted of finfish such as salmon. This bodes well for the Atlantic Canadian fishery.

Downside Risk. In practice, however, critics argue that CETA also gives the EU greater rights to challenge Canadian fisheries regulation as unfair, using mechanisms similar to those available to the U.S. and Mexico under NAFTA. There's some basis for this argument: for example, CETA specifically targets Newfoundland and Labrador's minimum processing requirements, which restrict the export of unprocessed fish from Newfoundland and Labrador in an effort to keep the value-added processing in-province. Under CETA, Newfoundland and Labrador's minimum processing requirements are exempt from challenge for three years after CETA takes effect – but after that, they will be an export restriction that violates CETA. But other federal fisheries policies will remain immune to challenge. For example, CETA specifically reserves the Canadian federal government's right to adopt or maintain laws "with respect to collective marketing and trading arrangements for fish and seafood products, and licensing fishing or fishing related activities". This includes restrictions on foreign ownership of fishing licences or fishing by foreign-flagged vessels, as well as the fleet separation and owner-operator requirements of the federal Preserving the Independence of the Inshore Fleet in Canada's Atlantic Fisheries policy. The federal government has also reserved in CETA various rights of provinces to impose residency and other restrictions on fish processing and aquaculture. Some CETA opponents argue the very fact such reservations are even required indicates CETA undermines Canada's ability to regulate its fisheries in the national interest in the future.

A Fund (Not Subsidy). Industry concerns about CETA's potentially detrimental effect on Atlantic Canadian fisheries haven't gone unnoticed by the federal government. To respond to these concerns, particularly the Newfoundland and Labrador minimum processing requirements, in March 2017 the federal government announced a new "Atlantic Fisheries Fund" as part of the Atlantic Growth Strategy. Refusing to call it a compensation fund, the federal government has instead positioned the Atlantic Fisheries Fund as a plan to work jointly with provinces to make the Canadian fisheries industry as innovative, productive, sustainable and globally competitive as possible – likely because CETA only obligates Canada and the EU to consult on the thorny issue of fisheries subsidies.

Sources:

http://www.acoa-apeca.gc.ca/eng/publications/FactSheetsAndBrochures/Pages/B_Aquaculture.aspx

https://www.canada.ca/en/atlantic-canada-opportunities/news/2017/03/atlantic_fish_andseafoodcompaniescastingawidenettoincreaseexport.html?=undefined&wbdisable=true

http://www.agr.gc.ca/eng/industry-markets-and-trade/statistics-and-market-information/by-product-sector/fish-and-seafood-industry/industry-overview/?id=1383756439917

http://www.acoa-apeca.gc.ca/eng/publications/FactSheetsAndBrochures/Pages/B_Aquaculture.aspx

http://www.international.gc.ca/gac-amc/campaign-campagne/ceta-aecg/seafood-fruits_mer.aspx?lang=eng

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