1. Agricultural Trade Update Ontario Dairy Council Convention June 7, 2011 Bobby Seeber, Strategic Policy Branch Ministry of Agriculture, Food and Rural Affairs

2. 2 Overview 1. Importance of Agricultural Trade 2. Multilateral Trade Rules - World Trade Organization 3. Bilateral Trade – Canada / EU 4. Regional Trade – Ontario/Quebec Bilateral.

3. 3 Ontario Agri-Food Exports  Ontario's agri-food exports were valued at $9.4 billion in 2010  About 75% of Ontario agri-food exports are consumer-ready / value added products – including pasta, bakeries/tortilla manufacturing, grain and oilseed milling and meat product manufacturing, and beverages  About 80 % ($7.2 billion) of our exports are destined for the US market  In 2010, $40m in dairy exports from Ontario to the US; $180m in imports  includes numbers under Import for Re-export  nonetheless, points to fact that trade equation is largely about defensive positioning

4. 4 The WTO Doha Negotiations  established in 1995 (although GATT dates back to 1947); operates on consensus basis  currently includes 153 members, which accounts for:  96% of world trade  23 of the 25 largest economies,  38 of the 40 largest exporters,  20 of the 25 most populous countries  Current negotiating round: Doha Development Agenda  initiated in 2001; conclusion by 20xx?  focus on integrating developing countries -- comprising 75% of membership -- into the global economy (particularly relevant after 9/11)  agriculture subsidies a key focus FACT FILE Location: Geneva, Switzerland Established: 1 January 1995 Created by: Uruguay Round negotiations (1986-94) Membership: 153 Secretariat staff: 637 Head: Pascal Lamy (Director-General) Membership Functions: Administer WTO trade agreements Forum for trade negotiations Handling trade disputes Monitoring national trade policies Technical assistance and training for developing countries

5. 5 Many elements to Doha Round Agriculture domestic support, market access and export subsidies. Servicesfinancial, communications, insurance, etc. Market Access reduction of industrial tariffs. Dispute Settlement clarify procedural rules. Rules review of application of AD and CVD laws. TRIPS wines and spirits registry, other geographical indications, drug patents/generic medicines. Environmentpreferential treatment for “green” measures? Singapore Issuesinvestment, competition, transparency in government procurement, trade facilitation. Treatment of LDCsspecial and differential treatment, finance and debt management

6. 6 WTO negotiating dynamics  US, EU and Japan are the main targets for agricultural subsidy reform –  in both 2002 and 2008, US Congress has been unwilling to accede authority over architecture of Farm Bill  EU moving forward on Common Agricultural Policy reform to contend with eastern Europe and Baltic state accession  Emerging markets – especially Brazil, India – are under pressure from US to compromise on access terms for industrial goods  US recently implemented National Export Initiative (NEI) – commitment to increase US exports by 50% in five years  China’s rising competitiveness in manufacturing raises anxieties about maintaining protections over import surges  Brazil faces significant economic difficulties aggravated by appreciation of Real; trade surplus with US of almost $10 billion in 2006 evaporated, shifting to deficit of $7.8 billion today  Save for US, others feel that bottom-line was tabled in 2008 and that little flexibility for more concessions

7. 7 Doha: looking forward  Implications for Canada:  domestic support reductions would reduce Canada’s actual spending threshold from $4.3b to $2.2b  market access commitments may leave Canada’s supply-managed sectors – dairy, eggs, poultry – facing greater import competition, depending on accommodations negotiated for “sensitive products”  The road ahead:  progress further challenged by both US Farm Bill renewal and US presidential elections in 2012 o current Administration feeling vulnerable on various domestic policy issues (eg., health care, job losses), and see no political traction in accepting agriculture subsidy disciplines  consideration now is on potential elements of a “Doha lite”?

8. 8 Canada-EU Negotiations  Commenced in 2009, representing negotiations on a scale that could eclipse NAFTA  The European Union, with its 27 member states and a population of 500 million, is Canada’s second-largest trading partner.  A joint economic study, released in October 2008, suggests that an agreement would boost Canada’s economy by $12b annually and increase two-way trade by 20%  European priorities include:  protection of food labels reflecting European regions of origin -- geographic indications – such as Parma ham, Parmesan cheese, Feta cheese, etc  government procurement, including provinces and municipalities -- local content rules – for example, Ontario Green Energy Act  provincial liquor board practices  A series of negotiating rounds scheduled through 2011, with conclusion of the negotiations expected in 2012

9. 9 Ontario-Quebec Bilateral Agreement  Ontario and Quebec sign bilateral Trade and Cooperation Agreement in early September 2009  agreement came into force on October 1, 2009  facilitate greater regional economic integration and competitiveness  The agricultural chapter includes provisions that specifically safeguard supply management and provincial marketing boards.  Agriculture ministers meet annually to discuss issues of common interest – last met in Toronto in early May.  2011 bilateral action plan includes a commitment to review disparities in dairy regulatory standards, by working with industry to:  identify priority areas with greatest impact on bilateral commerce,  develop recommendations for bridging gaps

10. 10 Conclusion  Potential challenges for industry moving forward:  adoption of protections for EU geographic indications  Possibility of greater import competition, depending on WTO Doha outcomes and Canada/EU negotiations  Market opportunities moving forward:  consumer trends towards healthy, functional foods o greater emphasis on eating local, fresh foods (eg., 100 mile diet) o ingredients with health benefits  population mobility = more cultural diversity = new market niches to fill  Need to ensure positive environment for trade within Canada, especially between two largest provinces (both in population/market and sector concentration)  look forward to ongoing collaboration with stakeholders