MARCH 2018 • COUNTRY LIFE IN BC
9 Trade negotiations boost grower uncertainties
Demise of NAFTA would have little direct impact on trade, however export about 90% of its fresh produce crops to the US, meaning it would take the greater hit from any protectionist action by the US. (Canada exports just 50% to 60% of its produce to the US.) While it’s tough for either country to divert its production, it’s even tougher for the US to seek alternative suppliers within its own borders. “Mexico simply has a climatic advantage in producing these crops because of its physical location,” Cook says. “You’re not going to change the underlying competitive advantages and you would just be putting a tax on consumers which then, of course, would reduce demand.” The way trade negotiations
by PETER MITHAM ABBOTSFORD – Businesses
love certainty, but trade talks in recent months have brought anything but peace of mind. “Looking at today’s trading
environment, I think it’s fair to say all economic sectors are on the defensive,” says Yves Leduc, director, policy and trade with the Dairy Farmers of Canada. Leduc spoke to farm organization representatives attending a February workshop hosted by the Centre for Organizational Governance in Agriculture (COGA). Leduc initially expected a period of peace following the conclusion of the Trans- Pacific Partnership negotiations in October 2015. New Zealand negotiators famously remarked at the time that all sides swallowed a few dead rats to reach a deal, and in Canada’s case that meant allowing foreign imports equivalent to 3.25% of dairy production and 2% of the poultry market into the country. “We were not entirely pleased with the outcome, however, we knew what we had to face,” Leduc told the COGA audience. But uncertainties roared back when the US elected Donald Trump president in November 2016. Trump’s immediate withdrawal from the TPP and bid to renegotiate the North American Free Trade Agreement (NAFTA) put trade back at the top of farmers’ concerns. Meanwhile, Canada continues to pursue an ambitious trade agenda that has opened markets in Asia while implementing the Canada-European Union Comprehensive Economic
and Trade Agreement (CETA) last September that will see cheese equivalent to 2% of fluid milk production enter the country. Coupled with concessions under the TPP, which was recently renegotiated to reflect the withdrawal of the US, Canada's dairy producers had lost access to 15% of the domestic market. “When you look at things in the aggregate, it’s no longer a small proportion,” he says. “We need to ramp up the pressure, and it’s clear that at some point we have to stop opening up and providing additional access.” Leduc is convinced that
Canada would never have opened its dairy sector under the TPP to the extent it did if the US hadn’t been at the table. Having done so, it now risks having to make separate concessions to the US. This is the big unknown
around NAFTA, which hangs in the balance this spring. US ambassador to Canada Kelly Craft says the US doesn’t want to leave Canada behind on NAFTA but says the US is committed to blazing its own path.
These kinds of comments concern Leduc. “Where are we going with
this renegotiation? I think there’s a big question mark,” he says. “We should not underestimate the potential for the US administration to initiate the withdrawal process.”
Negotiations
He expects the trade negotiations to extend into summer, barring a US notice of intention to withdraw. And that’s a genuine possibility, given who’s pulling US negotiators’ strings. “This negotiation has been completely different than any
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other negotiation we’ve ever been a party to,” Leduc says. “The US administration has played a very, very influential role in the NAFTA renegotiation. Many of the proposals that have been tabled by the US have been influenced or been written by the administration itself as opposed to the trade department.”
Return to WTO tariffs The uncertainties have
many farmers wondering what NAFTA’s demise could mean for their businesses. While wine grape growers feel pressure from California over how the province has managed wine shop licenses permitted under the original free trade agreement Canada signed with the US in 1988, Leduc and others say that NAFTA’s collapse would simply see Canada return to World Trade Organization tariffs.
Those tariffs aren’t
onerous, says Roberta Cook, a cooperative extension specialist in agricultural and resource economics at the University of California-Davis. “The tariffs were low
before 1994, just pennies per pound on most produce crops, so even if you went back to tariffs that were in place before that time, they probably wouldn’t be that significant,” she told greenhouse growers at the Pacific Agriculture Show in Abbotsford at the end of January. “Of course, there’s the question of whether Canada and Mexico would be treated equally.” NAFTA has helped Mexico
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are going right now, the biggest threat is uncertainty.
“No one likes to be operating in an environment with uncertainty,” she says, while assuring producers that they don’t need to fear the loss of markets. “Trade is going to continue to be within the North American arena for these crops.” Similarly, Leduc said
uncertainties surrounding the future of supply management could jeopardize investments in the dairy sector, something that’s flourished in the belief the sector was secure. However, all things being equal he foresees little impact from the demise of NAFTA. “The tariffs that are
currently being maintained by the US on dairy are essentially WTO tariffs,” Leduc says. “It would not be the greatest outcome if the US was to withdraw from NAFTA, but it may not be as dramatic as some might think.”
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