Scramble to sign CPTPP trade deal is short-sighted

Canada must move carefully, writes Trevor Hargreaves.

NAFTA ... CPTPP ... CETA. Trade deals are typically big on acronyms and short on details when it comes to the ramifications for our domestic economy. Modern trade agreements are built upon a sizable fallacy: The concept that they’re bringing new products to new markets. In reality, these agreements largely represent a shuffle of foreign product into pre-existing markets.

This isn’t all negative of course. It can lead to lower prices for the consumer and increased market choice. But it can also lead to the offloading of jobs to foreign shores, a decline in safety or animal welfare practices, environmental issues, foreign labour issues, etc. Long story short, Canada needs to move extremely carefully and strategically when considering new trade partnerships.

Recent NAFTA negotiations haven’t been going well. U.S. President Trump and his rotating cast of characters are fond of expounding a “me first” attitude when it comes to the U.S. trade perspective, and that isn’t particularly workable for Canada and Mexico. The likelihood of failure is growing due to the ongoing impasse with U.S. negotiators.

Perhaps as a result of these background pressures, Canadian negotiators recently hurried to move Canadian negotiations along with the CPTPP trade agreement. This framework excludes the U.S., and establishes a strengthened trade partnership with the Pacific Rim countries. Arguably, this in turn will weaken the U.S. position at the NAFTA negotiation table in weeks to come, as Canada demonstrates an outward shift toward trade partnerships with other countries.

As part of the proposed CPTPP framework, Canada has reportedly agreed to a 3.25 per cent concession of the Canadian dairy market. This was negotiated under the initial TPP framework last year when the U.S. was part of the proposed deal. But upon U.S. withdrawal from TPP, dairy access should have been significantly ratcheted downward. Canadian dairy operates under a supply managed economic structure, and has high import tariffs on foreign product. Accordingly, it’s oft viewed as a golden goose in trade negotiations. In short, other countries are always very anxious to push for increased access in this sector.

The Canadian dairy industry is already dealing with 2.2 per cent access recently given away under the CETA agreement. And with NAFTA negotiations ongoing, the threat of additional market concessions is looming. Dairy represents close to $20 billion of Canadian GDP on a yearly basis. Canadian dairy is not an industry supported by government subsidization (as it is in the U.S. under the U.S. Farm Bill). In Canada, dairy is a self-supporting system. And while the federal government is fond of stating that they want a vibrant, strong, and growing dairy sector that creates jobs and fosters investment, by continually giving away pieces of the industry, they are jeopardizing the well-being of the industry.

As we turn our heads toward NAFTA, the U.S. currently benefits from a five-to-one dairy trade surplus with Canada. Under current international trade commitments, Canada already takes in three times more imports into our market (over 10 per cent) than the U.S. does in theirs (approximately three per cent). In addition, many American agricultural stakeholders oppose the dairy-related demands being made by U.S. negotiators and are calling for the adoption of supply management in the U.S.

The Canadian system’s merits are obvious relative to the U.S. industry model, which suffers from significant overproduction and price fluctuation. There is little argument for granting additional dairy access to the U.S. under NAFTA, yet they are pushing hard for additional access in negotiations.

If you were a young Canadian dairy farmer today, how willing would you be to take over your parents’ farm and assume the mantle of next-generation farmer? Would you be willing to assume the sizable debt-load and responsibility when your market is being chipped away at on an almost yearly basis? Market access of 3.25 per cent under CPTPP may not sound like a lot but the numbers add up quickly as one trade agreement after the next gets rubber-stamped.

The Canadian dairy industry is a community industry. As Canadians, we all exist in a global economy, and Canada needs to continue strengthening our role as a player in global markets. But this needs to be balanced with the health of our domestic economy. Regional food security tomorrow means better consideration for the needs of Canadian agriculture today. Trevor Hargreaves is Director of Producer Relations and Communications with the B.C. Dairy Association and President of the British Columbia Farm Writers’ Association.