Increased volatility in market access means Canada must improve trade wherever it can — and that means the EU
The commodity boom of the late 2000s and early 2010s has been over for about five years.
It’s been replaced by a new era in Canadian agriculture that doesn’t really have an identity.
It could be called the era of ”market disruption.”
“If market access over the last few years … has taught us anything, (it’s) be prepared for closures and market disruptions. They can happen any time and anywhere,” said Michael Young, president of Canada Beef, the producer-funded organization that promotes Canadian beef and veal to domestic and international customers.
The facts support Young’s argument because Canadian farmers have coped with a ream of market access challenges in recent times:
- China’s threat to stop buying canola because of dockage and blackleg contamination.
- Italy’s country-of-origin labelling rules for pasta, which discriminate against Canadian durum.
- Americans discounting the price of Canadian honey relative to American honey.
- China banning Canadian canola because of “pest” issues.
- China refusing to buy Canadian beef and pork because of ractopamine contamination.
- U.S. mandatory COOL for meat, which discounted the price of Canadian beef and pork.
Some of these market disruptions, likely most of them, are political and are non-tariff barriers to trade.
If Young and others are right, Canadian farmers are now living in a global trading order where established or emerging markets could shut down overnight.
This means that $50 million in monthly canola exports to country X could drop to zero for eight to 18 months.
Since the World Trade Organization has become redundant and basically impotent, Canadian producers are fortunate that the country has free trade deals with nations that represent a large chunk of the world’s population — Japan, Vietnam, South Korea, Mexico, the United States and the European Union.
The deals will not prevent market disruptions, but when one door closes there’s a good chance that other doors will remain open.
To navigate the “era of market disruption,” agri-food exporters probably need four or five big markets for Canadian pulses, proteins, oilseeds and food ingredients.
The obvious ones are:
- the U.S. and Mexico
- Pacific Rim (Japan, South Korea, Vietnam, Indonesia)
- The European Union
- India (maybe)
Of that list, one door is almost entirely shut to Canadian agri-food — the EU.
The bloc has 512 million people and cannot feed itself, mostly because of activists who dream of a farming utopia where oxen pull a single spade plow and farmers scatter seed by hand.
Sales to Europe are pathetic, in spite of the Comprehensive Economic Trade Agreement signed by Canada and the EU and a real opportunity to export beef, pork, oilseeds and other foods.
Annual pork exports to the EU were around $4 million and beef exports to continental Europe were around $8 million in the first 11 months of 2018.
During that time frame, Canada had a $155 million trade deficit in beef and pork with Europe.
The weak sales are mostly explained by non-tariff trade barriers. The Europeans are skilled at inventing regulations that effectively ban imports, such as claims that Canadian beef processors don’t follow EU protocols for washing carcasses.
The Canadian Agri-Food Trade Alliance is growing weary of the European roadblocks and said so in a July 16 news release.
“The consequences of these non-tariff trade barriers are real — they’re shutting out a significant portion of Canadian agri-food exports,” CAFTA said. “In fact, EU agri-food imports from Canada are down 10 percent since CETA was implemented.”
It will require many frustrating meetings and much effort to increase agri-food shipments to Europe, but the Canadian government and exporters need to pry open the European door.
That’s because the Chinese market will probably open, close, open and close again for Canadian canola, beef and processed food over the next decade.
And what if a Democratic president sided with the National Farmers Union in the United States, which openly supports COOL?
Without Europe, Canada will be stuck with two or three major options for its agri-food exports.
In the era of market disruption, that’s not enough.