It has become inevitable that any comprehensive trade deal Canada signs results in the surrender of part of its supply management system.
However, exclusion from the Comprehensive and Progressive Agreement for Trans-Pacific Partnership — we call it the TPP-11 — was never an option. Canada’s exports to South Korea, for example, plunged when that country signed trade deals with the United States and the European Union.
The TPP-11 offers great potential for many Canadian farmers if the details are similar to the first version of the deal that originally included the United States, which President Donald Trump then rejected.
That “if” is legitimate, since we do not yet know the text of the new agreement, and we do not know what level of compensation will be offered to dairy, poultry and egg producers who will see increased competition to varying degrees, resulting in lower income.
Still, beef, pork and grain producers are excited about the new deal.
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The TPP-11 includes Canada and 10 Asian-Pacific countries including Australia, Vietnam, New Zealand, Mexico and most notably, Japan.
More access to the Japanese market is a big win for many Canadian farmers because tariffs there can be steep. Imported frozen beef from Canada, for example, saw tariffs increase to 50 percent from 38.5 percent last August, yet imports continue to rise. That market is worth about $100 million. Imagine the possibilities if tariffs are dropped to as low as nine percent; or for the $1 billion in pork exported to Japan every year.
In the original TPP worked out in 2015, grains and oilseeds producers, as well as processors and exporters, together thought the deal could be worth an additional $1 billion in trade. The canola industry alone said the original TPP would have meant up to $780 million in increased exports. The barley industry estimated an increase of $80 million a year. Wheat for human consumption would have seen tariffs fall 45 percent, allowing for significantly increased exports. (It’s thought that under the new TPP, tariffs on Canadian wheat exported to Japan would drop by $65 per tonne.)
Negotiations on the new TPP-11 will continue until early March. The deal encompasses a market of almost 500 million people with an economic output of more than $16.7 trillion. (For comparison, the annual U.S. economic output is $25 trillion.)
Yet supply managed sectors have legitimate concern. Egg farmers say the new TPP will cost them $808 million in lost income once the deal is fully implemented.
If TPP-11 opens up 3.25 percent of the dairy market, as the original deal did, on top of the extra imports allowed under the Comprehensive Economic and Trade Agreement with the European Union — for which the federal government has promised $350 million in compensation and investment — there will be a weakening of the sector. (CETA allows doubling of imports of cheese to Canada.)
And in ongoing discussions for a new North American Free Trade Agreement, there is a lot of pressure from the U.S. to allow more access to Canada’s dairy market. Would a NAFTA deal include the U.S. in that 3.25 percent access to Canada’s dairy market — as in the original TPP — or would there be additional allowances?
No one knows. That’s why dairy and poultry farmers are voicing such concern.
Still, Canada has identified the agri-business sector for significant growth, hoping to increase exports by 50 percent to $75 billion by 2025. That won’t happen by sitting still or avoiding trade deals.
Bruce Dyck, Barb Glen, Brian MacLeod and Michael Raine collaborate in the writing of Western Producer editorials.