WINNIPEG, Manitoba (Reuters) - Canada may ban an insect-killing chemical used to protect crops because it harms aquatic bugs, including midges and mayflies, while the government continues to investigate whether imidacloprid poses a risk to bees.

Imidacloprid, made by Bayer AG, should be phased out within five years, the Pest Management Regulatory Agency (PMRA) said on Wednesday.

Imidacloprid is part of a class of pesticides called neonicotinoids, also called neonics, that are applied as a seed treatment or sprayed on plants’ leaves. Neonics have drawn scrutiny in recent years after research pointed to risks for honey bees, which have been in serious decline in North America, possibly due to pesticides, loss of habitat and climate change.

The European Union limited use of neonics, including imidacloprid, two years ago. There is no such ban anywhere in North America yet, said Scott Kirby, director general of environmental assessment at PMRA.

Bayer, the biggest imidacloprid manufacturer, is “extremely disappointed” in the decision, said Bayer Canada Vice President Derrick Rozdeba, in a statement.

“Canadian growers value imidacloprid due to its efficacy, safety to applicators and favorable environmental profile, when used according to label instructions,” he said.

The recommendation is a surprise, said Dave Carey, manager of government affairs and policy at Canadian Seed Trade Association, whose members include seed suppliers Syngenta AG and Monsanto Co.

“There are always concerns when a product that companies and growers rely on is taken off the market,” Carey said.

Monsanto treats most of its soybean varieties with imidacloprid, spokeswoman Trish Jordan said.

Ron Bonnett, president of Canadian Federation of Agriculture, said phasing out the chemical may not cause problems for farmers because other neonics are still available.

“I don’t see a lot of red flags right now,” he said.

The government will now hold a consultation period on the change before PMRA makes its final decision next year.

The regulatory agency is also reviewing two other neonics, clothianidin and thiamethoxam.

The move was greeted with cautious optimism by Canadian beekeepers, who have been concerned about a possible link between neonics and spikes in bee deaths.

Phasing out imidacloprid may result in fewer bee deaths, but it depends on what chemicals farmers replace it with, said Rod Scarlett, executive director of Canadian Honey Council.

Environmental Defence, an activist group, said the decision is welcome, but the phase-out is unnecessarily long.