TPP has great potential for some industries

Most of the Canadian news coverage of the Trans-Pacific Partnership agreement has focused on the potential threat to Canada’s supply managed dairy and poultry sectors.

“There hasn’t, in our view, been enough understanding of how we could benefit,” said Brian Innes, vice-president of government relations with the Canola Council of Canada.

That is why the council issued a news release outlining how the 12-country Asia-Pacific trade pact could increase exports of Canadian canola products by up to $780 million per year.

The council estimates the agreement would boost oil and meal exports by one million tonnes a year through the gradual elimination of tariffs in key markets such as Japan.

“Our industry has been trying to get rid of the canola oil tariffs in Japan for decades, literally,” he said. “And so we thought it was time for people to understand how important it could be for canola.”

The calculation was made by analyzing the impact of existing trade agreements and gathering input from exporters and processors.

The $780 million figure is a net gain that takes into account the likelihood of decreased seed exports to the Asia Pacific region as crushers in markets such as Japan reduce production because of the increase in imported oil.

Canadian canola oil faces a 15 percent tariff in Japan, which is why almost all of the $1.2 billion in annual canola exports to that market is seed.

However, the lucrative seed market is under threat from Australia, which recently implemented its bilateral free trade agreement with Japan.

The tariff on Australian canola oil is two percent lower than Canada’s effective April 1 and will continue to reduce at the rate of one percentage point per year.

“The questions that we ask as a canola industry is why should oil from Western Canada be disadvantaged relative to Australian canola oil?” said Innes.

He said it is a worrisome development in Canada’s oldest canola market.

“Japan is Canadian canola’s backyard,” he said. “It’s a market we built up over four decades now with very strong relationships, and it’s one of our most stable and high value markets for our exports.”

It is also where Canada would reap the biggest rewards under the TPP agreement, with the lion’s share of the $780 million net gain in exports coming through increased canola oil sales to Japan.

Canola crushers have invested more than $1.5 billion in the processing sector over the past several years. They crushed seven million tonnes of canola last year compared to 3.4 million tonnes in 2004.

That crush volume is expected to increase to 14 million tonnes by 2025, so it is important to develop new markets for oil and meal.

“Our strategic plan really hinges on stable and open market access, and the TPP is an important part of stable and open market access,” said Innes.

Trade in the region is governed by the 20-year-old World Trade Organization agreement, which was implemented before genetically modified crops were commercialized.

Innes said the TPP is a 21st century agreement that will likely tackle important non-tariff trade barriers by agreeing to develop low level presence policies and clear, transparent and science-based approval systems for GM crops.

“Obviously, biotechnology is a big thing in agriculture. It’s incredibly important to canola,” he said. “And so acknowledging that regulations on biotechnology shouldn’t impede trade is very important in a trade agreement.”

Most of the benefits for the canola sector will come through increased oil and meal exports to Japan, but there is also potential to boost sales to other markets such as Vietnam, Chile, Malaysia and Singapore.

Innes believes it is “very feasible” that a TPP agreement will be concluded before the end of the year.

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