A couple of times in recent years in his market outlook presentations to the World Pork Expo – a fabulous pig-based event I yearly cover – economist Steve Meyer has commented that “Some customers aren’t worth having.”
He had been referring to Russia as a buyer of U.S. pork, and we’re seeing evidence of why that’s so right now, with Russia’s tit-for-tatism against Canadian and other western food products following the sanctions we imposed on Russia and Russians following the Crimschluss and the interference in Ukraine. (For a story by my colleague Barb Glen on Russia’s recent bans see this story.)
Russia plays lots of games with trade, imposing constrictions and bans for all sorts of inventive reasons that few in trade consider to be justified on the grounds claimed. In that, Russia’s a lot like China, which in recent years has appeared to attempt to perform a kinder and gentler form of central economic control than in its hardcore Communist days by playing around with imports of products from countries like Canada. Chinese authorities aren’t likely to admit what they’re doing, so we don’t know this for sure, but it’s what most trade analysts think. In order to manage domestic prices, farmer returns and national production, China either leaves its borders open or narrows the door.
A big difference between China and Russia is that China’s a customer worth keeping, regardless of how vexing some of its actions can be. It’s the world’s biggest growing economy and shows every sign of becoming a more and more important player in the world economy in coming decades. As a food and agriculture importer, it appears to be becoming the world’s most important market. That’s not something that most Prairie farmers would want to give up or antagonize.
But Russia’s a different matter, as Meyer has been noting. It tends to be a low-end market for price, it is notoriously unreliable as a partner and the country doesn’t seem to have much economic future. It’s basically a discount shopper that’s hard to work with. China’s obviously worth working with, placating and keeping on good terms with, but investing a lot of time in a relationship with Russia doesn’t seem worth too much of our while. If it wants to be a residual, discount buyer of whatever we have left after serving our higher-paying and better behaving customers, then by all means we should sell to its buyers. But as Canadian meat exporters are finding out yet again with this present complication, Russia isn’t worth basing a business plan on. If our low-end, low-quality competitors like Brazil and Argentina want to focus on the Russian market, we don’t need to scrap too hard for it. (To see a story on those countries’ attempts to fill the void we and the other bannees have created, read this.)
An even more complicated market that’s vexing us right now is the European Union, with its Byzantine internal politics making the present Canada-EU free trade deal negotiations seem fraught with future disappointment, and creating jaded expectations assuming a frustrated and frustrating result. But like China, Europe’s a market worth going to great lengths to develop and protect, even if it plays some of the same games Russia plays. The EU is a good market already and potentially a great market, and at least they follow the rule of law, even if those laws and regulations sometimes seem to be just elegant ways to disguise trade constriction. Europe is a customer worth having.
Russia’s ban on western food exporters like Canada isn’t likely to hurt us much and will probably be relaxed when Russian citizens get annoyed enough by rising food prices in a declining economy. But this present vexation will be worth remembering next time any of us consider basing future plans and investments on a relationship with Russia. It might not be worth it.