Amer­ica-first agree­ment brings more re­stric­tions

USMCA makes Canada-China trade more dif­fi­cult

Winnipeg Free Press - - BUSINESS - LAURA RANCE

S de­tails emerge in the af­ter­math of trade ne­go­ti­a­tions be­tween Canada and the U.S., the num­ber of pun­dits call­ing it a “good deal” for Canada is shrink­ing faster than hopes of get­ting one last shot of warm au­tumn weather.

Even the name of the agree­ment, USMCA, de­parts from the no­tion of a North Amer­i­can trad­ing part­ner­ship to put Amer­ica first.

At best, the Cana­dian ne­go­tia­tors con­tained the losses in key iden­ti­fi­able ar­eas — dis­pute set­tle­ment, au­tos and sup­ply man­age­ment, but the nu­ances around what it gave up — even in agri­cul­ture — are quite as­ton­ish­ing.

Most in the agri­cul­tural com­mu­nity, with the ex­cep­tion of farm­ers un­der sup­ply man­age­ment, were re­lieved to see the U.S.-Mex­ico-Canada Agree­ment an­nounced, with sev­eral ma­jor com­mod­ity or­ga­ni­za­tions, in­clud­ing Ce­re­als Canada, hail­ing it as a vic­tory for free and open trade.

It’s an in­ter­est­ing spin given the clause in the deal that es­sen­tially ties Canada’s hands when it comes to ne­go­ti­at­ing trade deals with other sov­er­eign na­tions such as China.

How is it a good idea to let an­other coun­try de­cide who you do busi­ness with, es­pe­cially as it per­tains to your sec­ond-largest trad­ing part­ner?

Ac­cord­ing to data re­leased by the Cana­dian Agri-Food Trade Al­liance just last year, China has be­come the third-largest des­ti­na­tion for agri­cul­tural prod­ucts world­wide and is ex­pected to be­come the world’s largest agri­cul­tural im­porter by 2020.

“China will be cru­cial to Canada’s eco­nomic fu­ture over the next 50 years. China is, and will re­main, Canada’s sec­ond-largest na­tional twoway trade part­ner af­ter the U.S.,” the al­liance said in a dis­cus­sion pa­per pro­mot­ing pur­suit of a bi­lat­eral agree­ment be­tween the two coun­tries.

“China is also Canada’s sec­ond-largest ex­port mar­ket, ab­sorb­ing $4.7 bil­lion of Cana­dian agri­cul­ture and agri-food prod­ucts in 2014.

Un­like many of Canada’s trad­ing part­ners, ex­ports to China have been climb­ing steadily and did not fall dur­ing the global eco­nomic cri­sis.”

Half of all Cana­dian agri-food ex­ports to China

Aare canola and canola prod­ucts, but it is also an im­por­tant des­ti­na­tion for Cana­dian soy­beans, pulse crops, wheat, bar­ley, beef, ge­net­ics and pro­cessed prod­ucts.

Un­der USMCA, if Canada seeks to fur­ther ce­ment that grow­ing trade re­la­tion­ship, it needs to con­sult with the U.S. and face the threat of puni­tive ac­tion.

Canada’s key com­peti­tors in that mar­ket, in­clud­ing New Zealand and Aus­tralia, face no such re­stric­tions. With re­gard to sup­ply man­age­ment, much of the at­ten­tion has fo­cused on in­creased mar­ket ac­cess for dairy, poul­try and eggs. If you fac­tor in the ef­fects of the con­ces­sions given un­der the Canada-EU and Trans Pa­cific part­ner­ship ne­go­ti­a­tions, it adds up to about 18 per cent of the Cana­dian dairy mar­ket.

Less has been said about the clause that fur­ther re­stricts dairy farm­ers’ abil­ity to ex­port dairy in­gre­di­ents such as skim milk pow­der to tightly reg­u­lated vol­umes. So they are grad­u­ally be­ing squeezed out of their do­mes­tic mar­ket, yet given no abil­ity to ac­cess global mar­kets. Does that sound free and fair to you?

This ap­proach se­ri­ously threat­ens the abil­ity of Canada to main­tain a do­mes­tic dairy and pro­cess­ing sec­tor, which is our sec­ond-largest food-pro­cess­ing sec­tor next to meat.

The fed­eral gov­ern­ment is miss­ing the mark when it sug­gests “com­pen­sa­tion” is in or­der, be­cause that im­plies pro­tect­ing the sta­tus quo. What’s needed now is a ma­jor in­vest­ment in adap­ta­tion.

Be­cause what be­came clear in the so­cial me­dia af­ter­math of the USMCA an­nounce­ment is that Cana­di­ans want to con­sume Cana­dian dairy. That lit­tle blue cow logo sig­ni­fy­ing Cana­dian milk con­tent be­came iconic overnight.

It’s partly be­cause peo­ple don’t want milk that has been pro­duced from cows in­jected with bovine so­ma­totrophin (BST), a hor­mone used to boost a cow’s milk which is al­lowed in the U.S. but not reg­is­tered for use in Canada. It was re­jected by Health Canada in 1999, not be­cause of safety con­cerns, but be­cause of an­i­mal-wel­fare is­sues.

Ev­ery­one un­der­stands that U.S. Pres­i­dent Don­ald Trump’s threat of eco­nomic iso­la­tion and sanc­tions was real and that sup­ply man­age­ment was a con­tain­able loss.

But their were few gains. Put sim­ply, for the Trudeau gov­ern­ment fac­ing vot­ers next year, a bad deal was bet­ter than no deal at all.

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