Introduction
Improving upon the quantity of trade through expanded volume or number of trading partners is important for the export-reliant Canadian agriculture industry. However, throughout 2023, Canadian policy makers attempting to maintain trade networks between Canada and the UK following their exit from the European Union, received staunch pushback from livestock producers associations across the country. This included the Canadian Cattle Association, Canadian Meat Council, and the Canadian Pork Council. Producer organizations quickly aligned in opposition of the UK joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) trade agreement. At face value, this may come as a surprise given the UK is Canada’s third largest trading partner, with cumulative trade value topping $43 billion per year.
The ‘beef’ regarding Increased access for UK exports to Canadian markets stems from the non-tariff barriers barring Canadian beef from UK markets. As such, many in the livestock and meat industries viewed accession of the UK into the CPTPP as a non-starter, as trade relations between the Canadian meat sector and the UK have long been in distress. Prior to Brexit, the UK was afforded the free-trade rules and partnerships established by and with EU member nations. Exiting the EU drastically changed the agreements of trade between Canada and the UK, many of which are still being sorted out. Resolving these issues may be a tall task for policy makers on both sides and it appears UK cheese is the most recent product to have restrictions levied against it in this international dispute of bovine byproducts.
Overview of UK-Canada Trade
In the realm of international trade, an explanation of past trade history, jargon, and the overlying context of the current dispute is necessary preceding a detailed discussion. Trade disputes are often impacted by the lack of international law governing cross-border business-to-business transactions. The World Trade Organization (WTO) was developed to streamline the flow of international trade through the establishment of a standardized set of rules. Given that the UK and Canada are both WTO members, disputes of this manner should be a non-issue and free trade should prevail. However, the lackluster guidelines surrounding non-tariff barriers and a non-functional appellate body within the WTO have severely limited the incentive for countries to act in good faith when enacting domestic trade policy. The result has been two-fold, with increased incidence of trade disputes between nations and improved popularity of smaller multilateral agreements, such as the CPTPP. The bovine derivative dispute encompasses both of these factors, with non-tariff barriers and the CPTPP playing a major role in this dispute.
The roots of this dispute trace back over 30 years, when the UK experienced its first known cases of BSE (mad-cow disease) in 1986. In the two decades that followed, BSE would come to the forefront of international food safety issues, as multiple deaths associated with human consumption of BSE-infected meat occurred world-wide. In May 2003, the epidemic struck Canada, as a bull (imported from the UK) tested positive for BSE in Alberta. The unravelling that followed crippled beef exports from Canada, bestowing upon beef producers and the entire meat supply chain an insurmountable economic setback. During the epidemic, most fatalities occurred within the UK, heightening consumer awareness and fear surrounding beef safety. In a magnificently incongruous act, the UK has banned the importation of Canadian beef, citing BSE concerns as the prevailing rationale.
Given the origin of BSE, it is overly ironic that the UK can indicate BSE concerns as the non-tariff barrier rationale for keeping all Canadian beef out of the UK. Today the UK is unfaltering in its ‘dissatisfaction’ with the Canadian meat inspection system, despite its excellent reputation worldwide as a leader in research and practice. Dissimilarly, beef imports from the UK into Canada totaled $24 million in the first seven months of 2022, but dropped 70% to $7.2 million in the first seven months of 2023. The motivations for UK policy makers for levying non-tariff barriers against Canadian beef may not be perfectly clear. However, consider that such measures limit the supply of beef in the UK, artificially inflating the price livestock producers under their governance receive in the domestic marketplace. Furthermore, extensive animal agriculture in the UK is heavily, and necessarily, subsidized to keep the industry prosperous. As such, it can be said (albeit anecdotally) that an increase in the net income of UK farms will lessen the burden of agricultural subsidies on government coffers. However, actions designed to uphold domestic industries by limiting trade without merit are disallowed under both WTO and CPTPP rules, signaling that the UK’s entrance into the CPTPP could mark the end of these restrictions.
The CPTPP – The Role of Science
Similar to the WTO, the CPTPP aims to reduce regulatory barriers through cooperation and conformity, intending to afford all involved parties equal opportunity when competing directly with foreign companies in their domestic market. However, this is not the case for Canadian beef in the EU, raising questions as to why the UK was accepted into the agreement to start with, how these barriers can be removed going forward, and whether the UK’s entrance into the CPTPP will provide benefits for the Canadian meat and livestock sectors or simply hinder economic growth in both nations by commencing a trade dispute.
Considering the importance of tariff barriers, the CPTPP offers similar regulations to those of the WTO aiming to remove tariffs on all goods. The CPTPP targets non-tariff barrier removal as well, with enforceable trade rules and a functioning dispute settlement mechanism. The current non-tariff barrier limiting access for Canadian beef is the use of peroxyacetic acid to clean cattle carcasses, a practice that has been approved by both Health Canada and (again, ironically) by the European Food Safety Authority. These approvals are based on scientific findings, manufacturer inputs, and consultation with other regulatory bodies, while the non-tariff barriers appear to be without scientific basis.
Brexit – Its impact on UK-Canada Trade
Prior to a 2016 referendum and an eventual 2020 departure, the UK was a member of the EU: a collective of countries representing over 15% of the global economy and the second largest economy on the planet. The months following Brexit were marked by turmoil in the UK and around the globe, as the Covid-19 pandemic stalled economic activity and exacerbated the negative effects of an unprecedented economic shift. As a result, the UK economy shrunk, recording a 2-3% decrease in real GDP. It is predicted that future forgone economic growth will account for growth losses measuring 5-6% by 2035, signaling that Brexit did not generate positive economic outcomes for the UK, instead leaving its economy floundering without the solid footing of trade within and beyond the EU.
The economic volatility experienced throughout the Brexit process undoubtedly incentivizes policy makers to expand international trade prospects, giving Canada the upper hand in these negotiations. The responsibility lies in the hands of Canadian diplomats and policy makers to ensure the deal is properly executed, with concessions afforded to the Canadian meat and livestock sectors. A good crisis mustn’t be wasted, and Canada should use the “tremendously weak” position of the UK to our advantage in negotiating with the UK moving forward.
The Cheese Dilemma
Following Brexit – and the UK’s removal from EU trade agreements – temporary measures were negotiated to allow the UK much needed time to develop long-term trade agreements. The momentary contract with Canada expired on December 31, 2023, opening the UK up to quota losses, higher tariffs, and other trade barriers, despite its accession into the CPTPP. Canada has since reallocated its quota for cheese imports previously held by the UK to EU nations such as France and Germany. As a result, consumers searching for cheese originating in the UK will have a harder time finding the products, and those they do find will be more expensive given the limited supply and higher tariff rates.
How this recent development in the trade dispute will fit within the CPTPP is undetermined; however, the pressure Canada is placing on the UK is a good start to begin removing unfounded, unfair, and protectionist barriers put up by UK policy makers. Using diplomatic power over a close trading partner is undoubtedly a delicate balance. Nonetheless, it was similar conduct on behalf of the EU that started this dispute over 20 years ago and this is something Canadian livestock producers, their representative organizations, and Canadian diplomats should not soon forget.
Retaliation and Moving Forward
Non-tariff barriers, though often touted as virtuous, often have little to do with the health and safety of the population. The barriers to trade imposed by the UK do not align with scientific consensus and in contradiction to both the WTO and CPTPP trade agreements. As such, Canada has imposed retaliatory measures against cheese and dairy producers to incentivize UK policy makers to act according to the scientific principles and trade rules upheld in their own jurisdiction. Doing so would afford both Canada and the UK with increased economic outcomes in the long run.
Non-tariff barriers of this type cause immeasurable harm to both parties in the dispute, most namely by potentially hindering relations between nations and invoking of retaliatory measures, such as those levied against UK cheese and dairy producers. Beyond this, Canadian beef and meat producers are unfairly discriminated against while the UK hurts both its consumers and production efficiency. By limiting market access, the price paid by consumers in the UK is artificially inflated. Higher prices for all members of the livestock and meat supply chains enables inefficient producers to survive, even thrive, in the domestic marketplace. In turn, incentives to innovate and improve are lost in a sector that drastically needs to match the pace of innovation seen in other agricultural sectors, such as crop production. In the current bovine dispute, all parties are losing; however, the simple removal of non-tariff barriers by the UK has the capacity to enable all parties to realize trade gains.