Continent is on the slow boat to a renegotiated NAFTA

The North American Free Trade Agreement negotiations appear to be moving at a snail’s pace and protection of Canada’s supply-management system for dairy and poultry, which is particularly important to many in the farming community, hasn’t yet played a major part in the talks.

Foreign Affairs Minister Chrystia Freeland has consistently said Canada will continue to support the supply-management system, pointing out that the United States already has a five to one dairy trade imbalance with Canada. She may feel that this is her hammer in negotiations, but it may not be enough for the U.S., whose dairy and poultry suppliers can gain substantially from the demise of supply management.

In a preliminary presentation of demands regarding NAFTA, the U.S. has identified supply management as one of its targets. Typically, in these talks, to win something, you have to give somewhere else, so supply management may not depend on the merits of its own case. It may also be influenced by how much Canada wants to win any one of its other nine points, including tougher labour and environmental standards, gender and indigenous rights, expanding procurement against buy-American rules and maintaining a process to resolve disputes, which U.S. border states have flouted continuously when it came to blocking Canadian exports of softwood lumber.

The U.S. has signaled that buy-American is at the top of its list, insisting all cars manufactured in the U.S. must contain at least 75 percent U.S. parts. Even the U.S. automotive industry is finding this difficult to swallow because it might affect its export of parts to other foreign manufacturers.

If the supply management system becomes a sticking point, the cost to the Canadian taxpayer in assistance and grants to the dairy and poultry industry would be massive to help it through a long and painful transition.

While there may be some decline in price for Canadian consumers, there will be problems. As U.S. products begin to stream across the border, a major Canadian business think-tank study suggested that the U.S. imports will establish the reference price for both the U.S. and Canada, generating a Canadian market share loss of 80 to 90 percent in egg production alone. It is estimated that Canadian chicken production may decline by another 40 to 70 percent and the Canadian turkey industry may disappear entirely.

Less than half the issues have been addressed by the first week of May. Everyone seems to agree that the talks should continue with an extended deadline proposed for July.

Complicating the talks further, Mexico is undergoing presidential elections and even if current President Pena Nieto is defeated, he would have until Dec. 1 to sign NAFTA into law. This would prove difficult; however, it would be easier than if leftist candidate, Andres Manuel Lopez Obrador, wins the election.

Grant Diamond is a tax analyst in Saskatoon, SK., with FBC, a company that specializes in farm tax. Contact: fbc@fbc.ca or 800-265-1002.

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