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Support for Canadian dairy, Ontario wine among European Commission list of “highly worrisome” trade barriers

100% Canadian Milk Logo (Source: Dairy Farmers of Canada)

The European Union has released its 9th Report on Potentially Trade Restrictive Measures. It is a painstaking exercise that tries to quantify the “sharp rise in protectionism across the G20.” Between the start of the latest global financial crisis and May 2012, G20 countries have apparently introduced 534 “restrictive measures,” according to the EU report, with 123 measures in the past eight months.

“[T]rade is one of the most important means of strengthening global growth and job creation, and one that we cannot afford to lose,” the report concludes. “The temptation of resorting to protectionism continues to be one of the biggest dangers the global economy faces. It remains therefore highly worrisome that a number of G20 trading partners continue to resort to trade protective measures.”

Canada gets off pretty easy compared to countries like Argentina, Brazil, China and Indonesia. But several heinous policies are still getting under the EU’s skin. They’re actually not that heinous at all, when you think about it, undermining the severe tone of the report and press released from the European Commission. But don’t take my word for it. Here are the Canadian protectionist measures pulled from their respective categories in the report.

BEHIND THE BORDER BARRIERS

– Ontario Province introduced sales targets for various wines. Wines sold in the stores of the Liquor Board of Ontario (LCBO) below these thresholds can be de-listed. Thresholds for Ontario wines are set at a substantially lower level than imported wines, despite higher sales volumes in the LCBO stores. These net thresholds can be considered as a possible barrier to trade. This measure is effective as of 20 July 2009.

GOVERNMENT PROCUREMENT RESTRICTIONS

– The domestic content requirements in Ontario’s Feed in Tariff program under its Green Energy Act have been adopted. They are as follows: i) for wind power projects over 10 kW, the requirement will start at 25 percent and increase to 50 percent on 1 January 2012. There are no domestic content requirements for wind power projects 10 kW or less in size; ii) for micro solar PV (10 kW or smaller) projects, the requirement was established at 60 percent as of 1 January 2011; iii) for larger solar PV projects, the requirement was established at 60 percent as of 1 January 2011.

– On 3 June 2010, the Canadian government announced its National Shipbuilding Strategy. The Strategy encompasses three streams – large ship construction, small ship construction, and repair, refit and maintenance projects. The government intends to use two Canadian shipyards for the procurement of the large ships – one to build combat vessels, the other to build non-combat vessels. The construction of smaller ships will be set aside for other Canadian shipyards. Only the repair, refit and maintenance of ships in the Government fleet will be sourced through competitive tendering. The cost is expected to range around CDN $35 billion, with the bulk ($33 billion) going for the procurement of large ships. The selection of the Canadian shipyards is still pending.

STIMULUS PACKAGES

• Canada decided to provide a subsidy to Bombardier, a Canadian aircraft manufacturer, in the form of repayable loans of up to CAN $173 million. This support, although formally in compliance with the Aircraft Sector Understanding for Export Credits signed in the OECD framework, does not follow the spirit of the agreement in that the preferential credit rate gives the Canadian producer an advantage over European manufacturer, none of which can benefit from a similar governmental support (Italy or France are not direct lenders).

OTHER

– ‘The ice cream initiative’: Canadian dairy producers instituted a CDN 13$ million/year programme to encourage Canadian dairy processors to use 100% Canadian dairy products in the manufacture of ice cream, instead of imported products, including imported butter-oil blends. The programme will give dairy processors a rebate on their cost of buying Canadian milk products. Contracts would be renewed annually and cover production from 1 January to 31 December with a start of 1 January 2009. Canada has also introduced a new special class of milk pricing (class 4M), which grants Canadian processors raw milk at subsidized prices well below international market levels for the processing of milk protein concentrates designed specifically for use in the manufacturing of cheese, thereby encouraging processors to use domestic product over imports.