Canadian seafood industry to gain advantage of CETA
After seven years of negotiations, the Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU has taken effect provisionally on September 21st 2017.
CETA is an agreement on business and trade between the EU and Canada intended to strengthen economic relations between the two markets. The Seafood sector in Canada is expected to be one of the parties to benefit from the trade deal. A part of the CETA agreement is to gradually phase out tariff lines, and by now 96 percent of Canadian seafood products are exempted from duties.
The remaining tariff lines will gradually be phased out over the coming three to seven years.
The Canadian fish and seafood sector exports about 75 percent of its production, which according to Fisheries and Oceans Canada equaled 639,465t in 2016. USA is the most important export market for Canadian seafood export (64 percent), followed by China (11 percent), the European Union (10 percent), Japan (4 percent) and Hong Kong (2 percent).
The EU imported a total of 5,943,000t of seafood in 2014, and with an average fish consumption per capita equaling 25.5 kg for its approximately 510 million inhabitants, a growth potential for Canadian fish and seafood in the EU is present. Factors affecting the global supply and demand and subsequently prices on seafood are, however, numerous and it remains to be seen to which extent the trade agreement will lead to considerable increases in volumes traded from Canada to Europe. Examples of tariff for seafood products from Canada into the EU are listed below.
Canada invests in logistics
According to the federal national fishing agency, Fisheries and Oceans Canada, lobster, Homarus americanus, is Canada’s top export to the EU in terms of value followed by snow crab and prawns. Canada has, however, not been able to keep up with the logistic setup for live lobster provided by the American competitors. In the American state Maine, lobster traders are within short drives of large airports in New York, Boston and New Jersey and getting lobsters from dock to dinner table in the EU is handled within two to three days.
In Canada Halifax Stanfield International Airport in Nova Scotia is the main airport for live lobster shipments in Canada. The Halifax airport serves the Canadian Maritimes, where the Canadian lobster industry is based, and has had a limited numbers of flights, forcing some lobster shipments to be handled from Toronto Pearson International Airport, an up to 18-hour drive from the Canadian Maritimes.
In order to stimulate the export of live lobster, which since September 21st 2017 has been tariff free into the EU, a solution for improving lobster logistics at Halifax Stanfield International Airport has already been implemented by adding 183.000m2 of space for cargo aircraft to load live lobsters which will be shipped to the EU, among others.
On top of investing in infrastructure, the Canadian government has shown willingness to boost the seafood industry by establishing a CAD 325 million fund (approximately 221 million EUR). The Lobster Council of Canada has suggested investing funds in marketing, research and development in order to promote the Canadian lobster brand, especially in the EU to enhance the advantages of the CETA agreement.
It will be interesting to see how the CETA agreement and the Canadian public investments in logistics and marketing funding will actually lead to increased sales of lobster in the EU.
Tariffs on cold water prawns to be phased out gradually
A volume of 23,000t of cold water prawns from Canada into the EU has been exempted from duty as part of the “End User License”-agreement. Some producers have optimized their production and logistic systems to this legislation to be able to compete in the European markets at equal terms as their European competitors. The end-use-importers have been assigned to keep records for the country´s respective Customs and Tax Administration. This end-user-license set-up is well established and will continue, but limited to 7,000t from January 1st 2018, but might be less attractive in the coming years, since the CETA agreement has introduced another duty free exemption.
In the current CETA agreement, the inclusion of cold water prawns from Canada with no end-user requirements will be phased in over 7 years. As per September 21st 2017 the first year's 'free' volume amounts to 6446t managed by a first-come-first-served system in the EU. From 2018 and onwards the yearly volume is set at 23,000t until the duty-free implementation in 2024. The objective of the long phase-in period is to ensure that existing market access is not affected negatively.
Also, CETA opens for Canadian processing of raw prawns from other countries thereby giving the processed prawns Canadian origin. Yearly an amount of 5.000 tons of cooked, peeled prawns can be exported from Canada without duty to the EU. This could as an example be cooked, peeled Jordani prawns from the US.
Over the recent years the Canadian prawn industry has been struggling with severe quota reductions and poor catch rates, factors that may play a much more determinant role in the price setting of Canadian prawns into Europe than the CETA agreement, read more.