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This study analyzes the consequences of Canada meeting or missing the December 31, 2005, deadline for negotiating equivalency with the EU regarding organic wheat trade. Potential scenarios, trade theories, cost savings, and trade impacts are discussed, emphasizing the importance of meeting the deadline to avoid devastating effects on Canadian organic wheat producers and the trade market.
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Making or Missing the EU 3rd Country List:The Case of Organic Wheat Shon Ferguson Project on Organic Agriculture University of Saskatchewan November 5, 2004
Introduction • Canada currently has a voluntary national organic standard • A mandatory standard is necessary in order to negotiate equivalency agreements with other countries • Equivalency is currently granted on a sale-by-sale basis
Introduction con’t • December 31, 2005 deadline for negotiating equivalency with the European Union (EU) • Three possible scenarios: 1) Meet deadline and trade continues 2) Miss deadline and Canadian organic products are barred from entering the EU 3) Deadline extended and trade continues • What will the impact be if we make the deadline or miss it?
Canadian Organic Wheat Exports • $13.2 million (estimate) • 45% to EU • 45% to the U.S. • 5% to Japan • 5% to rest of world
World Organic Wheat Trade • Canada has ¼ of world market share in world organic wheat trade • Competition: • U.S. • Hungary • Australia, Argentina, Slovakia • EU imports 65% of organic wheat
Trade Theory • EU halt to Canadian organic exports: • A “non-tariff barrier” • Potentially devastating to Canadian producers • Producers and consumers in every country affected • Equivalency established: • Trade cost savings?
Scenario 2: Canada meetsdeadline Certification Cost Savings: • Producers may save about ½ a day in time filling out certification papers • Certification Bodies may save accreditation costs • BUT not likely to lower costs of trade • No increase in trade
Scenario 2: Canada meets deadline Trade cost savings: • Assume trade cost savings of 1% • approx. $3/tonne • ($120 per 40t container) • Due to less hassle for importers and exporters
Conclusion • A halt to trade with EU would have a devastating impact on Canadian organic wheat producers • Trade loss = $8,600 per producer • U.S. would be flooded with Canadian organic wheat • U.S. producers worse off • Possible trade friction?
Conclusion • The additional benefits of gaining equivalency with the EU are small, uncertain • Cost savings passed back to producers? • Producers may find it easier to market their own grain directly to EU buyers • Canada MUST either • Make the December 31, 2005 deadline • Or extend the deadline To avoid the worst-case scenario
