Canada needs to consider tougher approach to trade

Should Canada stop being nice when it comes to agricultural trade? That seems to be the gist of October’s policy note by research firm Agri-Food Economic Systems.

The argument in the report is solid. The options for Canada range from nice to naughty.

So, at what point should Canada’s government and the agri-food industry accept the scenario laid out by the report’s authors as the foreseeable reality?

How long do we hold on and hope agricultural trade returns to “normal” before we bring out what amounts to Canada’s big guns?

We should certainly be getting ready.

The report’s authors argue that the fundamental nature of trade has changed. No longer are we facing market misalignments that eventually sort out prices through supply and demand. Instead, domestic policies — mainly protectionist or punitive — are skewing the marketplace to the extent that Canada can no longer sit still.

That situation is aggravated now that it’s obvious that agri-food is the weapon of choice for punitive measures when countries have trade disputes, even when agriculture isn’t at the centre of the dispute.

Since Canada is a major exporter of food this will cause problems, but it can also provide leverage.

The report’s authors point out that food security is important to China and Japan because they cannot supply enough to feed themselves. And the United States depends on meat imports from Canada to keep its processing industry going and on Canadian consumers to buy its products.

Much of what the report lays out is what we’re seeing play out: China and the U.S. undermining rules-based trade, and leveraging access to their huge markets as a cudgel.

The World Trade Organization is becoming ineffectual in its ability to solve trade disputes, and will be almost completely ineffective by the end of this year. At that point, it will lack enough sitting judges to set up a trade dispute panel because the administration of U.S. President Donald won’t approve them.

So there’s no white knight waiting nearby, unless one considers a possible recession to be a wake–up call to the big economies not to engage in trade fights, but that would be optimistic.

In short, the dispute between China and Canada, in which China is using Canadian crops and meat as a weapon to achieve its political means — freeing Huawei executive Meng Wanzhou from detention pending extradition to the U.S. — isn’t a one-off situation. It’s a symptom of a much bigger reality.

The report’s authors make seven recommendations, including: addressing the WTO’s futility (Canada is leading an effort to try); using Canada’s ample supply of food, particularly meat, as an entry point to discussions with China (Canada is trying that too); striking a trade deal with a post-Brexit United Kingdom (advisable); developing alternative crops to lower dependence on the big ones (major research dollars should be aimed at this now); engaging in more discussion on agri-food through organizations like the United Nations, with a gentle reminder (nudge, nudge) of Canada’s important role in feeding the world (this would be old-fashioned soft power); and placing a tax on agri-food imports (ouch!).

As the report’s authors rightly noted, “a number of these options would have been seen as extreme, wrongheaded or even absurd only just a short time ago….”

True, but if Canadian agricultural officials and the industry aren’t considering all this now, Canada is already behind.

Karen Briere, Bruce Dyck, Barb Glen, Brian MacLeod and Michael Raine collaborate in the writing of Western Producer editorials.

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