NAFTA: Canada’s agriculture industry hangs in the economic balance

Ottawa's recent tactics should set us up well for talks on NAFTA, but Washington needs to give some sign that it sees Canada’s as a key trading partner

canolaHALIFAX, N.S. Jan. 26, 2017 /Troy Media/ – As trade deals fall like dominoes in the United States, how badly will Canadian agriculture be damaged?

The Trans-Pacific Partnership (TPP) has been on life support for some time. America is embracing a new era of economic nationalism – even Hilary Clinton vowed during her campaign to kill the deal. And now President Donald Trump has moved to withdraw the U.S. from the trade deal. Some partners, notably Japan and Australia, say the TPP can be salvaged without the Americans. Canadian officials are significantly less hopeful.

The loss of the TPP will certainly be a missed opportunity for Canadian agriculture, particularly the cattle, hog and maple syrup sectors.

Now all eyes are on the North American Free Trade Agreement (NAFTA). As Washington rethinks its economic relationship with Mexico, Canada hopes not to become collateral damage, particularly in agriculture.

But first, let’s just assume the Trump administration cares about Canada. Agrifood trade between the two countries is worth nearly $50 billion a year. Food ingredients and finished products are traded daily.

Any hamburger sold in North America is a symbol of the integration of the two agricultural economies, from Saskatchewan wheat to make the bun to Alberta beef to B.C. mushrooms to California tomatoes. The mix is astounding.

Trump’s secretary of agriculture, former Georgia governor Sonny Perdue, was named just days before inauguration. That may show how unimportant agriculture and food policies are to Trump.

A veterinarian by profession, Perdue was a Democrat who became a Republican before becoming governor. He understands the cattle industry quite well and once worked in the fertilizer industry.

So it’s difficult to see how his vision for American agriculture could hurt Canada, no matter what happens with NAFTA. But anything is possible. Just look at the silliness of the Country of Origin Labelling rule, known as COOL, which haunted our livestock industry a few years ago. COOL is consistent with Trump’s America first approach, so it could return.

Can Canada’s point person when it comes to international trade handle that kind of pressure?

Chrystia Freeland’s recent appointment as minister of Foreign Affairs speaks to her ability as a good communicator and an astute politician. But her negotiating skills remain unproven (she walked out of talks for the Comprehensive Economic and Trade Agreement last fall while in her former post as International Trade minister). And while Ottawa was appointing Freeland, who is banned from Russia, Washington was endorsing Secretary of State Rex Tillerson, an astute businessman who has close ties in Russia.

The news of Freeland’s appointment earlier this month most likely passed unnoticed in Washington. And that’s a problem. Combined with our government’s immigration, marijuana and climate change views, tensions could mount quickly between Ottawa and Washington. And that would not go unnoticed.

Given that most of its wealth comes from trade with the United States, Canada must find ways to be more relevant to Americans.

While America resets itself, Ottawa is getting busy. Prime Minister Justin Trudeau met this week with Stephen Schwarzman, head Trump’s Strategic and Policy Forum. Schwarzman sounded a calming note, saying trade between the two countries is largely balanced.

And Ottawa has repealed or amended almost 200 tariffs on food ingredients imported from the United States. The list includes fruits and vegetables, cereals and grains, spices, fats and oils, food preparations and chocolate products. All are now duty-free. This equates to about $48 million worth of tariffs, a significant amount for the food industry. The list, however, did not include anything from our highly protectionist supply management regime in the dairy, egg and poultry sectors. This could be more ammunition for U.S.-based dairy groups requesting the end of our quota system and high tariffs on imports.

The good news is that the tariff changes mean it will cost less for Canadian processors to buy from American suppliers. It won’t do much to bring down Canadian food retail prices, but it will certainly help our food manufacturing sector, which desperately needs help.

And the decision sends a clear signal to Washington that Canada wants to buy American. That’s Ottawa’s most important trading position right now.

Ottawa’s recent tactics should set us up well for talks on NAFTA.

But Washington still needs to give some sign that it cares about Canada’s economic role as a key trading partner.

Troy Media columnist Sylvain Charlebois is dean of the Faculty of Management and a professor in the Faculty of Agriculture at Dalhousie University. Sylvain is included in Troy Media’s Unlimited Access subscription plan.

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