GUELPH, Ontario — In recent months, two new trade deals have given Canadian agriculture a much needed lift. In the wake of the behemoth $1 trillion American Farm Bill, a pact which clearly undermines the Canadian livestock industry with its protectionist country of origin labelling (COOL) rules, new potential openings in Europe and Korea are timely. Canada’s true global awakening is nigh.
Canada now has deals covering the East and West — call it strategic global trade coverage if you will. In the East, Canada will be gaining access to Europe, while in the West connecting with the gateway to many of the World’s fastest growing economies, such as Korea. The Canada-Korea trade agreement will likely be easier to ratify, given there are only two countries involved but, nonetheless, both pacts are equally crucial for the future of Canadian agriculture.
The Eastward-facing EU deal will give our beef and pork industry increased access to a market of 500 million affluent consumers and position Canada as a portal between America and Europe. With the St. Lawrence Seaway acting as a watery highway, Ontario and Quebec are likely to benefit from this deal.
We can see that Canada’s first trade deal in the Asian-Pacific market and commitment to Korea will also better position Canada at the Trans-Pacific Partnership negotiating table. The forecasted economic expansion under that partnership, which includes Chile, Japan, Malaysia, and Singapore, is almost unprecedented and will become a wealth creation engine over the next 20 years. Regrettably, Canada is hardly trading with these countries right now. B.C. and the Prairies, which transact more with Korea than other regions, will likely rectify this lack and capitalize on this new trade opportunity.
With this new agreement, Canada will literally just be catching up with the EU, Australia, and the U.S. in the livestock arena, since these countries and regions already have free trade agreements with Korea, the portal to the lucrative Asian market. Ottawa estimates that the new deal will boost Canada’s exports to South Korea by 32 per cent.
In actuality, instead of seeing agricultural trades tip in Korea’s favour at a rate of around 14 per cent per year, the new deal will stop the hemorrhaging. This deal will likely put Canadian beef producers on a more level footing with America and other counterparts for the Asian market.
Let’s face it, the Canadian beef and pork sectors have been experiencing periods of severe and prolonged financial strain with exceptionally narrow margins, increasing liabilities, and general economic stress taking their toll. COOL, unfavourable currency exchanges, increasing input costs, mad cow, swine flu — there seems to always be something on the horizon curtailing growth. As a result, more players in these sectors are exiting and leaving a field of producers looking for new opportunities.
Often overwhelmed by the ever-powerful pro-supply management lobby, Ottawa never ventured to move boldly on the international front. Just recently, dairy farmers raised a fearful din when Ottawa allowed European cheese to be included in the Comprehensive European Trade Agreement, and it likely won’t die down any time soon. Thankfully, however, it seems Ottawa won’t be backing down either.
Our inward-looking agricultural policies have reached a dangerous point of obsolescence. Demand for traditional commodities like milk or beef plateaued years ago as Canada started to become older and more ethnically diverse.
With its relatively small population and abundant access to natural resources, its agriculture can only grow by looking outside its own borders. Our trade deficit in the agriculture and agri-food sector has now surpassed $8 trillion. Given our strengths and competitive advantage, that deficit should actually be in surplus.
With the wheat board monopoly over and signs that supply management is slowly coming to an end, the "risk mitigating" era in Canadian agriculture may be over.
At any rate, Ottawa is clearly forcing the debate on the issue domestically by building its case globally. It could help the Conservatives win a second consecutive majority next year, but nothing is certain. What is certain, though, is that Canada has shown its will to play ball with the rest of the trading world, finally.
Sylvain Charlebois is associate dean at the college of management and economics at the University of Guelph in Ontario.