Canada’s Minister of Agriculture, Mr. MacAulay, has said that five Canadian companies have lost their certification to import chicken, stemming from another trade problem related to U.S. imports. The revocations of import privileges relate to mislabeling of good chicken as spent fowl. An investigation was started after a surge in imports of high-quality made-for-meat “broiler” chickens mislabeled as “spent fowl”. The spent fowl mislabeling is believed to have been done to get around Canada’s supply management rules for chicken and poultry products. Global Affairs and the Canada Border Services Agency have been investigating.
What does this have to do with the North American Free Trade Agreement (“NAFTA”)?
First, there is the mistaken belief that NAFTA allows all goods from the United States to enter Canada on a duty-free basis. Chickens are one of the goods that is carved out of NAFTA so-to-speak. There are special rules in NAFTA to protect supply management. Canada has reserved rights under GATT Article XI:2(c)(i) with respect to dairy, poultry and egg goods specified in NAFTA Appendix 703.2.B.7. All of Canada’s supply managed goods are covered. The effect of Canada’s reservation is to make imports of poultry products subject to import quantitative restrictions (that is, import quotas) and high duties for over quota limits (even on U.S. chickens).
Second, Canada’s Duty Relief Program (“DRP”) rules relating to chicken is being studied by the House of Commons Standing Committee on International Trade and a report, with recommendations, will be written shortly. There is a lot of talk about a certification program or DNA testing for chickens – I am not making this up. A trade war may be brewing over more restrictive requirements for imports of chicken from the United States.
The chicken trade issue was the subject of discussion on September 20, 2016 before the House of Commons Standing Committee on International Trade. Minister MacAulay testified on September 20, 2016:
An earlier meeting of the House of Commons Standing Committee on International Trade took place on August 3, 2016.
On August 3, 2016, Frédéric Seppey, Canada’s chief agriculture negotiator and assistant deputy minister for trade negotiations and agreements at Agriculture and Agri-Food Canada, testified about issues surrounding the imports of spent fowl and diafiltered milk. With respect to pountry, Mr. Seppey provided prepared testimony:
“Canada’s dairy and poultry industries operate under supply management. The goal of supply management is to match production with anticipated Canadian demand. Supply management relies on three key pillars: production control, producer price control, and import control. These pillars are essential to preserving the integrity of the system. Import control and predictability are essential to the effectiveness of supply management, and necessary to accurately determine the national supply requirements and avoid disruptive shortages or surpluses on the Canadian market. The national production quotas set by dairy and poultry marketing boards take into account imports when trying to match the Canadian demand.
Mr. Seppey answered a question about the spent fowl issue as follows:
This is important to importers of chicken because whenever there is circumvention of existing rules, more restrictive rules are prepared and implemented. Stay tuned to this trade issue.